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Regulatory Reform (10)

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The original documents are located in Box 29, folder "Regulatory Reform (10)" of the James M. Cannon Files at the Gerald R. Ford Presidential Library. Copyright Notice The copyright law of the United States (Title 17, United States Code) governs the making of photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United States of America his copyrights in all of his unpublished writings in National Archives collections. Works prepared by U.S. Government employees as part of their official duties are in the public domain. The copyrights to materials written by other individuals or organizations are presumed to remain with them. If you think any of the information displayed in the PDF is subject to a valid copyright claim, please contact the Gerald R. Ford Presidential Library. Digitized from Box 29 of the James M. Cannon Files at the Gerald R. Ford Presidential Library THE WHITE HOUSE WASHINGTON April 6, 1976 MEETING WITH THE RECULATORY COMMISSIONERS Thursday, April 8, 1976 The Cabinet Room 2:00 PM (60 Minutes) From: Edward Schmults DD I. PURPOSE - To meet with the Chairman and one other Commissioner from each of the ten independent regulatory. commissions. - To continue the dialogue on administrative reform of the regulatory commissions that was started July 10, 1975 at your meeting with the commissioners. - To review the progress reports received from the agencies and to discuss plans for future reform within the agencies. II. BACKGROUND, PARTICIPANTS, AGENDA, AND PRESS PLAN A. Background: The importance of administrative reform within the ten independent regulatory commissions was highlighted at the July 10, 1975 meeting with the Commissioners. At that time you asked the agencies to concentrate on a four-point reform program to: 1. Improve economic analyses of proposed or existing regulations; 2. Reduce delays and backlogs; 3. Increase representation of consumer interests; and 4. Increase reliance on competition wherever possible. FORD -2- Progress Reports. Each of the agencies has submitted a report on its efforts in these four areas. A summary of these reports is attached at Tab A. Although several agencies have taken significant steps toward improvements, there is still much work to be done. Continued interest in achieving significant reforms needs to be reinforced through discussion of agency progress and future plans. Objectives of the Meeting. The meeting is designed to be a smaller working session than the meeting last July. Each Chairman will be asked to discuss his agency's most significant reform effort and his most persistent reform problem. The general discussion will focus on the various approaches to reform and will serve to encourage additional needed reforms. September Reports. You will ask each agency for a second progress report to be submitted by September 15, 1976. B. Participants (Seating Chart at Tab B): Regulatory Commissioners Civil Aeronautics Board John E. Robson G. Joseph Minetti Commodity Futures Trading Commission William T. Bagley Gary Seevers Consumer Product Safety Commission Richard O. Simpson Lawrence M. Kushner Federal Communications Commission Richard E. Wiley Robert E. Lee Federal Maritime Commission Karl E. Bakke Clarence Morse Federal Power Commission Richard L. Dunham John Holloman -3- Federal Trade Commission Calvin J. Collier Paul R. Dixon Interstate Commerce Commission George M. Stafford A. Daniel O'Neal Nuclear Regulatory Commission William A. Anders Marcus A. Rowden Securities and Exchange Commission Roderick M. Hills Philip A. Loomis, Jr. Administration Officials The Vice President Secretary of the Treasury, William Simon Assistant Attorney General Kauper William Seidman James Lynn James Cannon Edward Schmults Paul MacAvoy Daniel Kearney Paul Leach Stan Morris C. Agenda: Opening Statement by the President 5-7 Minutes Introductory Remarks by Edward Schmults 3 Minutes General Discussion Including a Statement by Each Chairman 45 Minutes Closing Statement by the President 5 Minutes D. Press Plan: To be announced; photo opportunity at the beginning of the meeting and a press conference by Ed Schmults, Paul MacAvoy, and one Chairman following meeting. III. TALKING POINTS Opening Statement by the President at Tab C. Closing Statement by the President at Tab D. Summary of Independent Regulatory Commissions Responses I. Improved Economic Analysis of Regulatory Decisions At the time of your executive order which implemented the decision to require inflation impact statements, all ten independent regulatory commissions responded that the order by its terms did not apply to them and they believed their special logislative status exempted them from the requirements you imposed on the remainder of the executive branch. However, all indicated that such analyses were already being roûtinely performed. Since that time, a number of the agencies report that intensified efforts have been carried out to improve the quality of the analyses used to guide their regulatory decisions. As of January 1, 1976, the CPSC, which is required by the Consumer Product Safety Act to perform economic analyses, adopted administrative procedures man- dating similar analyses for actions taken pursuant to all the statutes it administers (e.g., Federal Hazardous Substances Act, Poison Prevention Packaging Act). The newest of these Commissions, the CFTC (established in April 1975) has adopted economic analyses as a means for deciding whether certain futures contracts should be licensed. The Commission has decided that unless it can be proven that trading in any given commodity has a negative economic effect, licenses for trading that good ought to be, and have been, granted. Congressional mandates have also required the SEC to do a thorough cost analysis of stock exchange rules which may prohibit competition. The SEC has recently used this authority to recommend the removal of one of the major remaining trading impediments. Likewise, the Energy Policy and Conservation Act which you signed last month requires FPC, ICC, CAB, FMC, and FAA to identify those laws or regulations (administered by them) which cause or permit the inefficient use of energy. Within a year, each agency is required to report to Congress on the rationale for continuing such a requirement. The NRC advises that it has adopted across-the-board policy quidelines calling for impact/value analyses, and has created two top level staff committees to review all such work. The ICC has reorganis. to place greater emphasis on analysis, and during 1976 it intends to evaluate its temporary decision (made in 1975) to allow trucks greater routing flexibility. It will also conduct a nation-wide survey to determine to what extent ICC rules FORD & 9ERALD LIBRARY 2 require trucks to travel empty or with partial loads one to existing "backhaul" regulations. The CAB is re- evaluating the important indices it uses (e.g., passenger load factors, corporate rate of return) in order to make decisions on airline rates, and intends to concentrate more on quantifying the trade-offs implied in reaching a decision on the balance between price and quality of air service. The FTC has put economic analyses to work to determine internally how staff resources should be assigned to its many programs. The Commission notes that it is increasing its use of such analyses to determine whether or not to issue any given complaint, and has begun to adopt a related technique to examine proposed business mergers for possible antitrust implications. The Commission provided no information on the use of this analysis for its controversial "line of business" reporting requirements. The FMC indicates that it intends to collect substantially more data from shipping companies in order to better determine whether existing FMC rules are adequate. Until recently, the FCC has concentrated its economic analyses on ratemaking decisions for telephone, telegraph or satellite communication. Although it is using cost/benefit analysis internally to help make decisions on the relative importance of its many regulatory programs, it seems less able to quantify the costs and benefits which impact on consumers and licensees in the broadcast (radio, TV, etc.) area of jurisdiction. II. Reducing Regulatory Delays The problems of regulatory delay have been particularly acute in the agencies controlling the energy and trans- portation industries. Chairman Anders of the NRC indicates that his first priority will be to reduce the time required for licensing safe nuclear power plants. As two means to reaching this objective, NRC has begun to approve standardize. plant designs and has signed letters of understanding with other Federal agencies (EPA, Interior, FPC) to permit con- current licensing procedures. Reduced approval time should help to reduce the costs of construction and financing, and attract more utilities to the use of nuclear power. The FPC reports that it plans to make greater use of automatic data processing, standardized reports, and informal hearings to speed up its consideration of license and rate cases. FORD & GERALD LIBRARY Both the ICC and FHC report that they are relying TOTAL on informal hearings and more clearly defined authorities within the Commissions' offices to help reduce the number and complexity of cases which the full Commission must consider. FMC states it has adopted a set of internal deadlines under which its staff must now work, and the ICC states it will make greater use of computer technology to standardize case formats and manage the flow of infor- mation through the entire decision process. The CAB is evaluating an Advisory Committee's report which calls for identifying the most meaningful information necessary to make decisions and eliminating many marginal data require- ments. The SEC is required by law to respond within a certain time frame to companies seeking to register new securities, and the Commission has set an internal objective of reducing the time required to identify and later process amendments to companies' initial filings. Chairman Hills has also just announced a 12-18 month review of all SEC disclosure requirements to determine what improvements in the current 40 year old system are necessary. The FCC has begun implementation of reduced reporting requirements and machine processing of application forms (particularly for smaller firms) in order to devote most of its resources to larger, more complex filings. While the CFTC did not feel that delay was a problem in its operations, it has attempted to develop procedures from the outset which will permit the large majority of small firms to continue "business as usual" without the burden of exceedingly complicated and time consuming reports. The FTC states that it has begun to codify a number of previous decisions in both the consumer protection and trade regulation areas in order to assist its staff :: make initial determinations in situations brought to their attention. Both FTC and the CPSC report that decentrationing certain authorities to their field offices will provide more timely and responsive decisionmaking, however, there has not been sufficient time in which to evaluate these management changes. In addition, CPSC is attempting =0 develop a set of priority indicators to help in responding more efficiently to the many petitions filed with it every year. Speedier CPSC decisions on petitions should help reduce manufacturers' uncertainty concerning compliance of their products. FORD & LIBRARY GERALD III. Increased Consumer Representation Several independent studies have pointed out that con- sumer representation practices throughout the Executive Branch require improvements. You have asked Virginia Knauer to coordinate the Departments' and agencies' plans for change. In addition, the ten independent commissions are taking a variety of steps to bring consumer interests more into focus. The ICC and CAB each have independent offices of Public Counsel whose responsibilities include arguing consumer viewpoints during the Commissions' hearings. The FTC has been authorized funds to help consumer groups pay for legal representation in Commission rulemaking proceedings and the NRC has a similar proposal out for comment. The FTC has also devoted substantial resources to its consumer protection activities, which include the identification of false or misleading business practices, advertising, etc. The ICC also reports that it will be concentrating more attention ón consumer complaints filed against moving and storage firms. The CPSC largely operates "in the open" by requiring the schedules for all business meetings and hearings to be published and by allowing the public to attend. The CFTC has adopted similar guidelines, but points out that public participation has been minimal during its first year of operations. Likewise, the FCC has opened up many of its meetings, has conducted a number of regional hearings, and has begun to publish a consumer oriented synopsis of pending cases and final Commission decisions. The SEC does not now, nor does it feel that it should, represent individual investors in cases involving potential or actual violations. However, the Commission's mandate to protect the interests of all investors has lead it to adopt a number of rulings dealing with approved accounting procedures for publicly distributed financial statements. The Commission has a continuing effort under- way to identify lost or stolen securities. Also, it indicates it is beginning to work with the industry's self- regulatory organizations to develop a model code of grievance procedures to be used in handling investors' complaints. The FMC reports that one of its major consumer initintivos is to push for logislation which would bring all intermodal or container shipments under the jurisdiction of one FORD is LIBRARY 9ERALD 5 Commission. At the present time, the ICC and FNC share responsibility for regulating cargo that moves both on land and by water. Although there is a major question as to whether any regulation of these movements is necessary or desirable, the present dual stewardship of intermodal traffic creates burdensome and costly duplication of paperwork and approvals. The Federal Power Commission states that it regularly entertains consumer briefs and has begun a program to solicit more opinions from State and local regulatory commissions whose jurisdictions would be affected by FPC decisions. IV. Increased Competition as a Substitute for Requlation This element of the Commissions' plans may have the greatest potential significance for achieving your overall regulatory reform objectives. Chairman Stafford of the ICC has openly and vigorously opposed your rail and truck reform legislation, and the Commission's formal report does not repudiate that position. A Blue Ribbon Panel of the ICC has recommended certain rule relaxations covering commercial zones and terminal areas, certain "no-suspend" pricing policies, and the definitions of exempt commodities, but these positions do not address the more fundamental questions of route and rate competition which your legislation seeks. Both the ICC and FMC contend that more detailed information on carriers' costs and revenues and stream- lined internal procedures will enable them to make better informed, and more timely judgments about the legitimacy of rates. CAB has stepped up its consideration of new route awards for some airlines, but SC far has refused to comment on your air bill. In contrast, the SEC has actively supported the Adminis- tration's desire to introduce greater competition into the securities markets. An SEC order in May 1975 abolishing fixed commission rates antedated your signing legislation accomplishing the same purpose. The SEC has recently ruled that several anti-competitive rules of the New York Stock Exchange must be removed, and is under Congressional mandate to examine and rule on other similar provisions. The Commission will be working over the next few years to establish a truly competitive National Securities Market. DERALD FORD LIBRARY The FPC, under Chairman Nassikas, supported decontrol of the price of new natural gas with appropriate monitoring and safeguards. While Chairman Dunham has not yet completed formulation of a legislative program, FPC has moved during his tenure to allow large industrial gas users to purchase their supplies directly from producing fields at intrastate rates. This action has the effect of partial deregulation of natural gas prices, since intrastate rates in most States more closely approximate the true market price for gas. The FTC has major responsibilities to enforce the antitrust laws and will be devoting more resources to those programs over the coming year. The Commission has taken a number of steps to begin opening up competition in areas which have traditionally lacked such competition, e.g., advertising for prescription drugs and eyeglasses, professional medical fees, and real estate brokerage. The Commission has also recommended to Congress that the legislation allowing milk price fixing by large cooperatives be reviewed in light of its substantial anti-competitive effects. Although the FCC's report contains some comments on possible changes in cable television regulation, the Commission's major initiatives to open up competition continue to be in the common carrier (e.g., telephone and telegraph) industries. Several recent rulings have opened up greater opportunities for satellite services, and have given manufacturers of interconnecting telephone equipment (e.g., computer terminal hook-ups) the opportunity to bid against existing manufactures who have heretofore enjoyed government protection. The CFTC cites the fact that it has authorized futures markets for several new commodities and financial instruments, and reports that its negative economic criteria are being used to place the burden of proof on those who object to the opening up of additional futures markets. # # # FORD & LIBRARY nawrence Clarence Daniel Marcus Robert Cary Philip John Card I'm rance Kushner Morse O'Neal Rowden Lee Seevers Loomis Holloman Dixon Minetti CPSC FMC ICC NRC FCC CFTC SEC FPC FTC CAB LIBRARY FORD is GERALD Bill Dick The Bill Rod Anders Wiley Vice-President Bagley Hills George Dick Stafford Dunham Cal Karl Collier Bakke Oval Office John Dick Robson Simpson Tom Kauper Jim Bill Lynn Seidman Jim Paul The Ed Bill Cannon MacAvoy President Schmults Simon Opening Statement of the President Good afternoon. It is a pleasure to have you here to follow up on our meeting last July. This continuing dialogue on regulatory reform is important to all of us in government - and to the American people. Let me thank you all for the progress reports that I received. They were useful to me and my staff in reviewing the successes you are having in improving your regulatory activities. Today, I am looking forward to discussing our common problems and our joint duty to see that we have a responsive and efficient regulatory system. Specifically, let's take a hard look at how regulations affect the consumer, small businessmen, and the taxpayer. Consumers are concerned with the costs of regulation. They feel a frustration both with the process and the results. Many are convinced that the costs are not justified and that the public interest is not being protected. Small businessmen are tired of the overwhelming number of regulations that are insensitive to small business needs and that make it increasingly difficult for small businessmen to survive. -2- The regulatory problems of small businessmen come up often in my discussions with our citizens. I hear about the large number of government forms they have to fill out every year. I hear about new products and services that small businessmen want to offer but can't because of unnecessarily restrictive regulations. I hear of enforcement activities that defy common sense. Finally, taxpayers are questioning the practice of adding more money and more people to government bureaucracies to solve problems. The taxpayers of this Nation are concerned about big government. They question having to pay for a government that doesn't recognize change, that doesn't think of new, less costly ways to achieve public goals. They expect their government leaders to be diligent in looking for better, more efficient ways to conduct the affairs of government. All of us at this meeting have a special responsibility for guarding the public interest. It is our obligation to provide the public a reasonable, fair, speedy and understandable regulatory system. You have made progress toward this goal in the past few months and your efforts are encouraging. But we need to continue our work. -3- - When I met with a bipartisan group of congressional representatives last June, there was broad agreement on four areas of common concern: - We must examine our regulatory practices in light of today's economic needs; - Competition should be relied upon whenever possible; - Many regulations cost the country more than they return in benefits; and - The regulatory process should serve the general public -- not simply benefit special interests. Clearly, our job is to show measurable results in addressing these concerns. Congress has indicated that it is looking for results. More and more, Congress is considering legislation to address regulatory problems. The reform of government regulations is a responsibility shared by the Executive branch, the Congress, and the independent commissions. Our joint effort to eliminate outdated, inefficient regulations and to improve essential regulatory functions is the best way we can fulfill our responsibility to the public. -4- As we discuss regulatory lag, we need to make sure we address the reordering of priorities and the new approaches that are being taken to cope with backlogs and delays. When we talk about consumer representation, we must go beyond just giving the consumer a chance to participate in proceedings. We must consider how well agency rules and regulations are communicated to the general public and how well consumers' interests are balanced against other points of view. When we talk about cost/benefit analysis, let's identify how well it is being applied to agency decisions as well as to internal agency management concerns. And when we turn to the importance of increasing competition, let's ask whether we are concentrating on marginal changes or whether we are addressing the fundamental question of whether or not the regulation is still necessary. Now I would like to turn the discussion over to Ed and Paul. Ed, would you like to begin? Closing Statement of the President Thank you. This has been a very useful meeting for all of us. To keep the momentum going, let me ask you to submit to me by September 15 another progress report on your efforts to achieve improvements in the four areas of concern - - reducing delays, increasing consumer representation, improving the use of economic analysis, and increasing competition. There is still much work to be done. I'm sure that the American people will be interested in our continuing progress in each of these areas. I have three requests for you to keep in mind as you prepare your next report. First, special consideration should be given to how we can make our progress -- as well as our regulations -- more understandable. For example, when you report on how you are eliminating or improving your regulatory functions, I would like to see a specific statement on how the change will affect consumers, small businessmen and taxpayers. The statement should be a statement of quantified benefits, not just a general assertion. Our regulatory system has been established in the name of the public interest. Certainly the general public should be given a clear explanation and justification of what we are doing and why. -2- Second, the report should list and discuss priorities for agency reforms. Along with the priorities should be recommendations on where regulatory objectives can be achieved in a less costly, less time-consuming, more efficient manner. If we are going to show results to the American people, we need to have a better idea of our priorities and how we will accomplish them. One of your first priorities should be consideration of wh ere there is workable competition or where competition could increase if outdated regulations were eliminated. It is our responsibility to see that our regulatory policies and practices do not perpetuate unnecessary restrictions on today's economy. Third, I ask all to concentrate, along with the other Executive branch agencies, on achieving a 10 percent reduction in the number of forms that federal agencies require. I was overwhelmed when I learned the total number of federal forms we expect the American people to fill out. It has been said that our continued requests for information cost individuals and businesses billions of dollars in time and expense every year. The cost of federal paperwork can no longer be considered an "incidental" cost. As a matter of fact, many small businessmen have pointed out that it just isn't worth it - 3 for them to hire new people or to even stay in business when so much time and effort must be directed to filling out forms instead of selling products or services. The Commission on Federal Paperwork is currently looking into long term approaches for reducing the problems and costs of paperwork. I recently directed the Executive branch agencies to achieve a 10 percent reduction in the number of forms by July. In your September 15th report on your administrative reforms, I would hope that you could also report on your contributions to achieving a reduction in reporting requirements at least equal to that of the Executive branch agencies. Let me thank all of you for your efforts. I look forward to your next reports. These should be very interesting for the American public and helpful to each of you who are dealing with similar problems. Through these reports, I hope that we can continue to exchange ideas on how to deal with our common regulatory reform challenges. Your achievements and future plans that we have discussed this afternoon convince me that we are all working toward the goal of making the Federal Government as responsive and efficient as humanly possible. THE WHITE HOUSE WASHINGTON April 8, 1976 MEMORANDUM TO THE PRESIDENT FROM: Ed Schmults and Paul W. MacAvoy SUBJECT: Task Force to Improve Regulation I. Background In your meeting with the Domestic Council Review Group on Regulatory Reform, you called for speeding up the pace and broadening the scope of reform efforts. Expecting that the Executive Branch regulatory agencies would not reform themselves, and that it would take strong outside pressure to reduce the costs that these agencies impose on the economy, we have tried to develop the most effective way of organizing both inside and outside forces for reform. II. Proposed Task Force on Regulatory Efficiency We propose that you establish an interagency task force on regulation directed to improving the operating efficiency of the agencies. The task force would have both a short-term and longer-term charter. The short-term charter would be to focus on two to three specific agencies that now appear to impose costs on the society that are substantially larger than their benefits. The task force would seek to identify particularly costly and ineffective regulations, or particularly onerous agency practices and procedures which could be changed quickly and effectively. At the same time the task force would lay out an agenda of major policy questions facing the agency, collect information currently available which addressed these questions and stimulate the gathering of any new information required. FORD -2- This would lay the foundation for broader, future improvements in Executive Branch regulatory activities. We conceive that this interagency task force will simplify procedures, reduce delays, remove redundant regulations as demonstrations to other agencies on what can be done. But the Task Force efforts will not stop there. Rather, they will provide a basis for sustained efforts to improve the performances of regulatory agencies at both broad and detailed levels. A. Organization of the Task Force The task force would be chaired by Paul W. MacAvoy of the Council of Economic Advisers. It would report to the Economic Policy Board. Sub-Cabinet members of each of the major Departments or agencies involved would be members of the task force. In addition to the task force, there would be working groups formed to develop proposals for the three specific agencies chosen for reform. The working groups would include representatives of the affected organizations. Specific working groups would be formed as a new organization came up for review, and dissolved as the work was completed. Finally, both the task force and the working groups would be staffed by combinations of insiders and outsiders. For example, academic consultants would be hired to complete specific fact finding assignments. Staff would be drawn from affected Cabinet departments, and also from OMB, CEA, Justice, and COWPS. The staff drawn from inside the target agencies would insure that the agencies were committed to the objectives of reform. B. Anticipated Benefits If this task force is established, you could expect the following results. First, the mere establishment of the group would be further evidence of your commitment to con- trolling the size and increasing the effectiveness of the Federal Government. Second, by next September, it is reasonable to expect important changes would take place in the regulations and procedures of the specific target organizations. This will produce immediate benefits and give impetus to subsequent broader policy efforts. -3- Third, by next January it should be possible to establish an agenda of major policy actions in those targeted organizations. This agenda would provide an action program comparable to that developed this year for the reform of the independent regulatory agencies. III. Target Agencies The choice of those agencies to be reformed is the most critical stop in the whole reform process. If an agency is chosen prematurely, reform proposals may prove to be impossible to put into effect within a year or may prove to have little impact on producers or consumers. Investigations within the last month have pointed to four likely targets: (1) OSHA. The OSHA manadatory physical standards for work conditions are extremely detailed, costly to meet, and have little or no effect on accident rates. A number of regional hearings would be held to determine the most costly and least effective standards. The reform program would seek to eliminate these particular standards. (2) The Export Control Board in the Department of Commerce issues export licenses for sales of major products to Eastern European and Sino- Soviet countries. The process is unduly prolonged and has an adverse impact on jobs in the United States. There are complicating national security issues however, SO that the reform effort has to be directed to developing a quicker and more effective licensing procedure. (3) NHTSA in Transportation is responsible for on- going programs in highway safety, as well as for major decisions on truck brakes and the air bag. This agency does not adequately consider the economy-wide effects of their more important decisions. An attempt should be made to develop procedures for doing benefit- cost analysis and using the analysis in decision- making. -4- - (4) FEA, although required by specific congressional mandate to develop comprehensive oil price controls, has managed to produce extremely complicated and cumbersome regulatory procedures. While decontrolling refined products over the next few months, FEA could make extraordinary efforts to simplify its regulations and to educate the public on the benefits from reduced regulation. IV. Necessary Actions An essential component in initiating this effort is your personal commitment. A commitment must be communicated to Cabinet officers and offices within the Executive Office of the President. A memorandum to appropriate officials and a press release are attached. Attachments see Task force THE WHITE HOUSE folder WASHINGTON April 8, 1976 MEMORANDUM TO THE PRESIDENT FROM: Ed Schmults and Paul W. MacAvoy SUBJECT: Task Force to Improve Regulation I. Background In your meeting with the Domestic Council Review Group on Regulatory Reform, you called for speeding up the pace and broadening the scope of reform efforts. Expecting that the Executive Branch regulatory agencies would not reform themselves, and that it would take strong outside pressure to reduce the costs that these agencies impose on the economy, we have tried to develop the most effective way of organizing both inside and outside forces for reform. II. Proposed Task Force on Regulatory Efficiency We propose that you establish an interagency task force on regulation directed to improving the operating efficiency of the agencies. The task force would have both a short-term and longer-term charter. The short-term charter would be to focus on two to three specific agencies that now appear to impose costs on the society that are substantially larger than their benefits. The task force would seek to identify particularly costly and ineffective regulations, or particularly onerous agency practices and procedures which could be changed quickly and effectively. At the same time the task force would lay out an agenda of major policy questions facing the agency, collect information currently available which addressed these questions and stimulate the gathering of any new information required. FORD Reg Reform FOR IMMEDIATE RELEASE APRIL 8, 1976 OFFICE OF THE WHITE HOUSE PRESS SECRETARY THE WHITE HOUSE EXCHANGE OF REMARKS BETWEEN THE PRESIDENT AND MEMBERS OF. THE REGULATORY AGENCIES AND ADMINISTRATION OFFICIALS THE CABINET ROOM 2:08 P.M. EST THE PRESIDENT: First, let me welcome you all to our second session. I remember very vividly the session we had before. I felt it was very constructive. I subse- quently had the opportunity to talk to Members of Congress, on both sides of the aisle, and at both ends of the Capitol. I think most of you recognize they have a very great interest in what we are trying to do. As a matter of fact, I think some of their efforts are probably as hard hitting as I hope ours are in trying to satisfy the industries and the segments of our society that all of you have a great responsibility and are deeply involved in. I think in this session we have today my remarks will be kept to a minimum because I am more interested in hearing about what you have done and what your plans for the future are. I think we have to recognize that there are certain areas that more or less cut across each of your agencies; for example, the consumer, the small businessman and, of course, the taxpayers. The latter affects not only all of you in a personal way, but as individuals who have a responsibility to handle a great deal of personnel, some more than others, and you all have a responsibility affecting our economy, and that affects our taxpayers. We do have some mutual problems, both in the Executive Branch per se and also in the regulatory agencies. About a year ago I asked how many forms are required of business generally or of citizens generally. I think the figure was around 5,200, which seems awfully high, but we had it verified and I suggested to Jim that we ought to require that every agency of the Executive Branch of the Government, as well as others, do something affirmatively to reduce that onerous burden on individuals and on our society. The target is 10 percent by July 1. Jim, I understand some are doing better than others. MORE FORD Page 2 MR. LYNN: Yes, and we have had a complicating factor. As we dug into it, we found there are some forms that are never reported. We find also some departments and agencies show progress toward the 10 percent cut. They work from the originally reported figure because they count ones they didn't know about before from the old 10 percent number. It is uneven, that is the best way to characterize it. THE PRESIDENT: We expect everybody -- and we will include the White House in that -- to get that 10 percent figure down. Ed Schmults and Paul MacAvoy have been handling this responsibility for me, and I would like at this point, Ed, if you would kick it off, and I will mainly listen and maybe ask some questions. MR. SCHMULTS: Before we begin our discussion, I would like to make a few comments on the progress reports you all submitted at the end of the year. Reform of our regulatory system is a long-term effort, and we would like to see what you have accomplished and what you are currently trying to achieve. There are some points that were not fully dis- cussed in the reports, and I hope we can talk about them this afternoon as we discuss our future efforts. We would like to direct our discussion to what has been done and what needs to be done. The reduction of agency backlogs and delays seems to be the highest priority for everyone here. There have been some marked achievements in this area, and it is interesting to see the various approaches you are taking to solve your backlog problems. Several agencies are also taking a number of important steps to increase consumer representation in their proceedings. In some cases, however, the consumer seems to be equated with the customer who benefits most directly from a regulated service. It is the American people who ultimately pay the cost of regulation, and all of them must be represented, too. In general, there is less progress in improving the quality of economic analysis. Some of the reports show understanding of the importance of increasing and expanding the use of economic analysis in agency policy- making. Most agencies seem to be more limited in how they are using economic analyses. MORE Page 3 Finally, most of the reports were far from specific in what was needed to increase our reliance on competition instead of regulation. It is not enough to determine how we are doing things without questioning why. I hope we will highlight our efforts today on future actions in this area. On the whole the reports are encouraging and responsive. I would like you today to report on what you consider your most considerable reform effort. I would like to call on each of the chairmen to discuss each agency's efforts. In order to have time to consider all the agencies, I would ask each agency about your most significant reform success and that your report be kept to three or four minutes SO we have time for follow- up questions. You will recall we advised each of you we are making a transcript of the meeting and plan to make it public. Let's begin with Dick Wiley of the FCC. MR. WILEY: On behalf of the Federal Communications Commission, I am pleased to discuss once again the important subject of regulatory reform. At our last meeting on July 10, Mr. President, you outlined four areas in which you hoped to see some improvements in our service to the public. Let me comment briefly on the Commission's recent efforts in each of these areas. Number one, elimination of antiquated regulations or those which stifle competition. For several years now, as our written reports indicate, we have undertaken a major deregulatory effort designed to eliminate needless, outmoded and overly burdensome regulation. We have, for example, modified or deleted over 400 rules in broadcasting and have made 25 major reforms to our cable television policies. We have made a special effort to reduce regulation of the small businessman, the person on whom the burden of Government paperwork falls most heavily. This is perhaps best exemplified by our new short-form radio renewal application, adopted just last month. The Commission has also placed considerable emphasis on rule changes in the common carrier field which have the effect of introducing competition in place of monopoly regulation. This has been true in domestic private line services, terminal equipment, land mobile radio and inter- national communications. MORE Page 4 In each of these areas, the Commission's actions have provided an opportunity for our free enterprise system to function, and the result has been to afford the individual consumer and the businessman a greater variety of modern communications options and alternatives and at reduced costs. Three weeks ago, for example -- and I think this was our most significant effort -- the FCC greatly expanded the opportunities for competition in the telephone equipment market. Number two, procedural delay. In July of 1974 we created a task force to undertake a comprehensive re-examin- ation of the Commission's adjudicative rules in order to eliminate unwarranted delays. Last month, the FCC announced a major overhaul of our historically cumbersome and time- consuming hearing procedures. Without going into detail, let me simply say that these innovations should result in decision-making which is faster, more efficient, and I believe more responsive to the public interest. The problem of agency delay has also been addressed in the context of an extensive backlog reduction program. Number three, expanded public participation. In the last two years, the FCC has substantially increased the opportunities for citizens and public interest groups to express their views to the Commission and to contribute to our decision-making. Specifically, we have instituted a regional meeting program in which the chairman, other commissioners and key staff personnel have met face-to-face with the public in such major urban areas at Atlanta, Chicago, Boston, Denver, Los Angeles, San Francisco and Washington, D.C. These sessions are supplemented by monthly full commission meetings which are open to groups seeking to present their views to us. We recently have instituted a new weekly publi- cation -- distributed to public interest and consumer organizations -- which summarizes FCC decisions and invites comments on our rule-makings. Just last month, in a significant action, we announced the opening of a Consumer Assistance Office whose function is to provide personalized aid to the average citizen in finding his way through the bureaucratic maze. MORE Page 5 Number four, economic impact analysis of regulations. A basic principle of regulatory reform is to insure that necessary regulation be as effective and efficient as possible, both in terms of the resources consumed by regulatory agencies and the economic consequences which these rules may have on the public. The FCC is now implementing a Program review analysis to give the Commission detailed information on the resource impact of major policy decisions and to review existing programs and operations from a cost-benefit perspective. The ultimate result of this project should be significant budgetary savings, a better recognition of the Commission's regulatory mission and a greater understanding of the specific economic implications of our regulations. Five, remaining problem areas. Despite our efforts, we cannot suggest, Mr. President, that the FCC has overcome all obstacles to optimum efficiency. One significant problem that has received a good deal of recent notoriety is Citizens Band radio. The principal difficulty here is the veritable explosion of consumer demand in the last year. THE PRESIDENT: How did Mrs. Ford get that? MR. WILEY: We are now instituting, I might say, an operation where every citizen can get a temporary permit, so it won't only be the First Lady. In early 1975 we were receiving about 50,000 applications a month. This year, the figure is over 550,000 per month. Associated with such a phenomenal rise are the problems of application backlogs, unlicensed and illegal operation, interference to broadcast and other home enter- tainment services and spectrum overcrowding. We have moved to deal with this situation by simplifying our rules and forms, automating our licensing program, investigating alternative licensing procedures and considering additional spectrum space for the service. We don't have all the answers to CB as yet, but if members of the public enjoy using this service -- and apparently they do including, I note, the First Lady, better known to her fellow CB'ers as KUY-9532, and I might say other members can also use that (Laughter), we will be listening for you -- the Commission must find new ways to permit them to do so without impairing other communications services. In conclusion, Mr. President, let me reiterate the FCC's full and vigorous commitment to deregulation and to overall reform of our service to the American public. We look forward to continuing to work with you and your staff in this very significant undertaking. MORE Page 6 THE PRESIDENT: Thank you very much. MR. SCHMULTS: Dick, does your experience with the citizens band problem suggest you might explore, in addition to the other steps you are taking, widening the exemption area so you wouldn't have to go through a licensing procedure process? MR. WILEY: We have looked at that. The greatest problem is the spectrum is not discreet. If you have interference in one portion of the spectrum, inevitably you will have interference in other portions. We believe the licensing procedure is the single greatest tool for enforcement. What we are doing, as I suggested to the President, the problem has been the people get the equipment and then have to wait six weeks to get their license. Temptation comes in and they start to utilize the equipment. We are setting up a temporary permit authorization. We will at that time have an informative, simple, easy to read pamphlet which tells the very basic regulations, what is necessary in order that all can enjoy this service. If it is not regulated, there will be chaos because of the closeness of the CB bands to broadcast bands and there will be interference. We might be able to go to a total deregulation but I think that is in the future. MR. STAFFORD: Could I make a cross-reference? MR. SCHMULTS: Yes, surely. MR. STAFFORD: I don't know whether it was before Dick or not, but the FCC asked us to get involved because the truckers were using this in the strike two years ago. It really had us all tied up and they were, as you may recall, really using them to benefit, tie up all the commerce that was trying to move. So the FCC asked us to get involved and try to hold them down because they didn't have authority in that area. So we put out an order then in effect threatening them a little bit, but that was about as much as we could do. But it gave truck management a lot of authority to tear them out of trucks. Now we find that a lot of the truckers -- a lot of the management now like the idea of having them in there because they are cutting down on their loss and damages they are having because they immediately put out the CB report the second they have lost a truck loaded with something very expensive. MORE Page 7 One of the largest truckers in the Southeast told me they were now cutting their losses better than 40 percent. They don't care about anything except getting their truck back with their load. So every taxi driver, everybody immediately knows he is going to get $1,000, $5,000 if he is the one that turns it in and they immediately move in on them. They have been catching many of these trucks. They don't say we will not pay you until you can put somebody behind bars, we will pay you just to get our truck back. MR. WILEY: The police are even now using CB. It is the one spectrum where every man can use the radio. I think we have to find a way to facilitate this. MR. STAFFORD: I would be concerned if you tried to deregulate that too much. MR. MacAVOY: One of the fastest areas in new technology is the communications industry and it appears to us we are on the edge of an explosion in communication from the use of satellite technology. Is the commission prepared to deal with the problems of entry permits, and rate setting as this new technology develops? MR. WILEY: I think SO. We have seen this coming for some time. I think I would tend to agree with you satellites portend a tremendous revolution in communication services. We have adopted, I think, a modified open entry policy because we do believe in competition in this area. A number of companies are making great investments to use birds and to develop this new service. We think that we have prepared carefully for this, starting back in 1972. We think we are ready for the revolution that will come. MR. MacAVOY: The interest is by private companies and telecommunications companies. Are they able to compete on an equal basis? MR. WILEY: I think they will be, yes. That has been the basic concept we have had. The Commission did make a decision to place a limitation on the American Telephone and Telegraph Company in this area. I must say the chairman and I dissented. That is the best way to get this new system developed and in the most productive way possible. MORE FORD Page 8 MR. SCHMULTS: Thank you. Could we hear from Mr. Bagley of the Commodity Futures Trading Commission? MR. BAGLEY: The first thing we will try to do is change the name of the Act. You don't know what the people call the Commodities Futures Trading Commission. Mr. President, gentlemen, let me take a little different tack rather than trying to regale you with what we have done in our 11 months of tenure. I think it makes a little more sense from my standpoint in trying to help you to look ahead at what all of us should be doing from the perspective of somebody who just came to town. I don't want to burden you with a restating of our unit, but the only point is we do not have regulatory delay; by the fact of the calendar we don't. We don't have regulatory conflicts and conquests. We don't have regulatory malaise. We haven't been around long enough to suffer hardening of the categories. So it wouldn't be fruitful for me to sit here and try to tell you we can make our decisions in three weeks -- big deal. But the fact is we do. I think it is more fruitful to try to broaden our perspective and talk of the broader problems and, hopefully, solutions that the new boy in town sees when he becomes all of a sudden chairman of a regulatory commission, having served his former life as a legislator and, WOW, it is different. (Laughter) I miss the accountability and commonality of a constituency. Commonality, meaning there is a thread that makes participatory democracy work, but that thread isn't there just because the President appointed five different people. That doesn't make for constituent democracy. So the biggest problem that you asked about that I foresee is how to first of all formulate the concept of and then build a broader constituency. That goes over the whole gamut, the whole spectrum. It is sort of obvious but, believe it or not, in our first discussions in this new commission, there was disagreement on whether we should try to build a constituency. Having agreed that that is some- thing we darned well better do, then you try to look in the direction of where you want to go. It is the luck of the draw as to where you end up -- five guys, all good people -- but it is the luck of the draw whether three guys go in that direction and two in the other because there is no inherent constituency. MORE Page 9 So what do you do? You try to create. In my humble opinion, this, I would say, is your major successful effort at regulatory reform, an atmosphere of openness. I am talking of open meetings. The Consumer Product Safety Commission and recently the Federal Trade Commission joined us by resolution in our open meetings. There are three or four bills in Congress and many are nightmares. They create a bureaucracy of openness but there are too many rules of how you do it. Mr. President, I think perhaps you are endorsing the concept, and the States, cities and counties in the last few years -- California since 1973. I found out that the City Council of Grand Rapids passed a resolution that they were going to have open meetings. The concept is here. It also helps to build a constituency. That is the point. Another way to build a constituency is to look at the so-called sunset laws. Colorado just passed one. There are three or four on the Hill. Again, there are problems with those bills because some of them contemplate immediate self-destruct of everybody here. You can't do it that way. But, again, for the purpose of accountability and constituency building, if you had a phase-in system where one entity, one agency every year over a period of 15 years with recurrent necessity to reauthorize, not just budget, reauthorize the very existence -- nobody is going to get rid of all the agencies, but at least there will be an occasion for rewriting of the law. That makes Congress more mindful of their obligation and creates in them the concept that they are the constituency. The third area, we will talk of data reform, getting rid of the forms. All well and good, we will be doing that We find some have been around since 1922 when our predecessor agency was enabled, but in addition, not just for the sake of efficiency, but again for public access, let's make those forms and that information something that the public can get to, can have access to and thereby understand what we are doing. Let the public in. Let them participate and create that atmosphere of participation. Lastly, and I mean this, if all of that doesn't work -- and I have my doubts as to whether it will: I took a quick look last night at the Ash report and their conclusion was in many instances the multi-member commission without a constituency, without built-in accountability has problems. MORE Page 10 I would very seriously recommend that your people look at the idea again of advocating a little surgery rather than cosmetics to really shake the regulatory tree. THE PRESIDENT: Did you find when you and your associates went in and took over that you were surprised, pleased, or felt otherwise concerning the operation of a commodity market? MR. BAGLEY: First, I was amazed that the industry existed. I was neutral. As far as the markets, they had been doing well, so there wasn't any major surgery on our part to undertake. We basically had to let them know we were not going to "Mau-Mau" them out of existence; that we weren't going to upset their marketplace. There are an awful lot of things, simply because of our new jurisdiction, that were not undertaken. That doesn't mean overregulation; it means from our standpoint making the market a better place and, therefore, helping it grow as it becomes more credible. That is sort of our regulatory philosophy. From the standpoint of the overall picture, I really believe if you don't have this concept of a constituency and accountability built in, then you will get captured sooner or later. Therefore, I would seriously consider taking a longer look at the Ash report and converting some of these agency heads to become accountable to the White House and accountable to the Congress. I have one further thought, a regret which I have to express. I am sorry that my regulatory responsibilities prevent me from campaigning -- that regulatory agencies don't allow me to get out and do what I would like to do. MR. SCHMULTS: Thank you. You have given us all some good thoughts to consider. Bill Anders of the Nuclear Regulatory Commission, could we hear from you? MR. ANDERS: Mr. President, the Nuclear Regulatory Commission's primary responsibility is to assure effective public health and safety in the use of nuclear power. We discussed this rule here about two weeks ago and I want to assure you that responsibility is being met. In addition, a key personal motivation of mine was to make the regulatory process not only effective but also efficient. By an efficient process, I mean one not fraught with delay, but one that is consistent and predictable and which facilitates industry planning. MORE Page 11 My colleagues have given me their full support and share my belief that procedural regulatory improvement and the development of a realistic regulatory ethic is completely compatible with our health and safety responsibilities. I will hit some of the high points of what we have been doing. We have been eliminating regulations that were unsuccessful or unproductive and making cost impact value assessments. The Commission revised its requirements for control of radioactive effluents from nuclear power plants when we determined the cost of additional equipment did not result in significant public health benefits. Furthermore, we revised our original implementation plan for these new requirements when it was itself shown not to be cost-effective. Such impact value review is now a basic tool used in evaluating proposed regulatory actions by our Senior Regulatory Requirements Review Committee. We have also taken a number of specific actions designed to increase regulatory efficiency, particularly in reporting requirements. These have been refined and reduced substantially to improve the focus on safety. We have arrived at a more realistic estimate of the frequency that information is needed for regulatory purposes. First year operating reports have been eliminated, and subsequent reports are now annual instead of semi-annual. As a result, the volume of paperwork provided from each reactor licensee has been reduced by several hundred pages a year without adverse impact on safety. We have also placed considerable priority during the past year on alleviating prime difficulty for the nuclear industry and the affected public; that is, the difficulty in planning in the face of uncertain governmental regulatory policy. We are continuing our efforts not only toward eliminating unnecessary time in reaching regulatory decisions but also toward stability and predictability in the decision-making process. It is in this latter area of stability and predictability that I believe greatest potential payoff to the consumer exists. As an example, we published a complete description of how the NRC staff is going about its safety review of nuclear power plant applications. These so-called "standard review plans" are enabling industry to plan with greater certainty, and have resulted in a more disciplined and predictable review. MORE Page 12 Furthermore, when industry knows what is and what will be expected of them, they can plan and utilize their resources more efficiently, thus providing the consumer more cost-effective energy and a safer product. I believe we established a number of organizational structures and probably, more importantly, enthusiastic staff reports which will assure that the concepts of both efficiency and effectiveness are built into the ways we carry out our every day business. These can be expected to have significant benefits to both the taxpayer and consumer. Much of this benefit will not become directly evident as it will consist simply in avoiding unnecessary bureaucratic growth and unjustified requirements. Additionally, Mr. President, we are strongly supporting legislation which your Administration has proposed on the Hill and which we are in favor of for new licensing procedures for nuclear power plants, particularly related to nuclear safety and regulatory efficiency. After I leave, Marc Rowden, our Chairman-designate, is particularly interested in this and will continue the efforts that we have already begun. Mr. President, Mr. Chairman, that is about all I have to say. THE PRESIDENT: You mentioned the meeting we had here several weeks ago where I got the full briefing on safety, safeguards and other matters involving nuclear power, primarily because of a situation involving California. I noticed the other day in Michigan -- my home State -- petitions are being circulated to get a referendum on the ballot in Michigan. I assume many of the same provisions are included in the California ballot. They are striving to get it on by the election this fall but apparently they are not getting as enthusiastic responses as they did in California. But if not, they will certainly aim for 1978. So this problem in California is obviously going to be a problem in other States. MR. ANDERS: California will be the bellwether of this whole affair and is the one we are watching. These folks who have a negative view on nuclear power- the regulatory hearing process is one amenable to being used for delay; in fact, that delay which still exists in the process is mostly attributed right to that segment. There is not much we can do outside the hearing process to make it much better. The California situation, which comes up on June 8, I believe, is one that is particularly insidious in that proposition 15 is written in such a way that if you don't understand it, you will vote for it and support it automatically. MORE Page 13 MR. SCHMULTS: Thank you. Now we will hear from the Securities and Exchange Commission. Rod is one that has gone from the frying pan to the fire in terms of regulation. MR. HILLS: Our efforts have been to institutionalize our procedures. Our new Director of Economic and Policy Research, which is a brand-new office for us now headed by a prominent economist, is determining whether a proposed regulation is worthwhile. We are monitoring to see whether our regulatory objectives are met and, if not, those regulations will self-destruct. In February we began an extensive study of the disclosure policies which have been developed by the SEC over 41 years. We have a prominent advisory committee which will oversee what is a major staff effort which we believe will result in not only a new disclosure policy but a very substantial savings in money each year to the public. This month we have approved a major additional effort to change and modify all of our forms and the under- lying regulations. Jim will know better than I what 10-K, 10-Q and 8-K means. Our change in just form 8-K will result in a 44 percent reduction in the number of 8-Ks filed. The underlying regulations, it will mean 75 percent of all the advertising expenses in an adversary proceeding will be eliminated. The savings annually will be in the millions of dollars from that one point. In March, we began an examination into all the regulations and laws pertaining to money management and are seeking an alternative to money management. We have a new division director, all new associate directors and a new chief counsel. In our judgment, within a short period of time our management of money management will be entirely new. Last month we appointed a Director of Small Business Policy to increase the ability of small businesses to raise capital, an effort we think is quite promising, an effort supported by the entire securities industry. Four months ago we adopted the so-called focus reporting system for local dealers. This reduces the paperwork dramatically because it means there is now a single form to be filed with the Commission for all self-regulated industries and regulatory agencies of 48 States. It reduces reporting by 98 percent. One of the largest brokerage firms in the country has told us the reduction of their audited fees - is 50 percent by this one change. MORE Page 14 Four months ago we began an evaluation of proposed regulations or rules and, as a result, we have withdrawn entirely 28 outstanding rules proposals. We found opinions in our administrative proceedings were taking two years to come down. We found the typical opinion took one year. Our attempt to reduce that typical opinion to 30 days is almost complete and it will shortly be at 30 days. We found we could not track in any fashion the delays in the thousands of filings made with our commission every year. As of last month, after a great deal of work and a great deal of help from the OMB, we now have a computer run that gives our managers a chance to identify every filing within a week or two after it develops. The OMB approved our request with your support, sir, for money to convert all our files to microfilm. That will further speed our work, reduce our staff and save us a great deal of money, and will include a reduction of 35 people from our personnel. We eliminated fixed commissions, a practice standing for 182 years. I think it is the only time that a commission in the history of the Government in a rate making situation got out of it. We believe that the efforts I have described will produce comparable results and comparable endorsement in the months ahead. THE PRESIDENT: What has been the net result to the consumer with the elimination of rate making? MR. HILLS: I think Ed made a good point a minute ago. It has been difficult for us to find out who precisely our consumer is. To date, the consumer has benefitted only to the extent he has been a participant in an institutional buyer. The cost of buying stocks through an institution is 5 percent. The same savings has not been passed on to individual buyers in precisely the same way because they don't yet have the effective muscle to have the brokerage firm reduce their rate. What we have found out is that the industry has been pricing their commodity in the wrong fashion. Having a fixed rate, they never tried to change it. It has now moved to a fixed share cost instead of a percent. If the stock was $100, they were charging $5. But now, industry is finding the cost is more related to the share. We are beginning to show the industry what it is costing them on a percent per share. That has shown the industry today in every category the cents per share cost to consumer is even a tiny bit less than it is to the institutions. So I think there is no doubt amongst any of us that the cost to the consumer to buy a share of stock has been dramatically reduced. MORE Page 15 I might say we are in mid-course of causing competitive market making in the securities industry. Today, on listed stocks, there is a monopoly position and we have reduced that monopoly position in à dramatic way for agency transactions. I think we have a growing consensus in the securities industry and certainly have a regulatory intent to eliminate this monopoly position. Once that is taken away and there is true competition in making the market stocks comparable, there will be another dramatic reduction in cost of stocks to the consumer. MR. MacAVOY: One of the arguments that seems to be the strongest or the most often presented in eliminating control of the commission was the service to the small purchaser; the individual buying a few shares would be eliminated, chaos would break out and, the result of the chaos is there would be no more service for small purchasers. Have you tracked the effect not on the prices but the quality of services? MR. HILLS: Yes, we have, but the phenomena was nobody bothered to price the individual service, but everything came together and they got their price. I know of no individual losing service except many parts of the industry are having a hard time trying to figure out how to develop their services, but they are trying. The issue of how to provide the right kind of service to the right kind of buyer is very much in the developing stage. We tried very hard to find who was going out of business. A lot of companies have, but there was by no means a dramatic exodus. We spent as much as four hours with people that went out of business trying to find out why. One businessman came to us and said, frankly, they hadn't realized it but they were not in an economic business, were not doing anything that made sense. We are now trying to find out the type of investment advice people want and charge them. Instead of making people pay for services they didn't want, we are allowing people gradually to get the services they do want. Traditionally we have said people sell stocks but don't buy them. The amount of stocks owned by institutions that do their own research has grown dramatically. Many individual stock purchases are now done by institutions, so by unbundling services we find people are developing services and hiring people that can produce the kind of services they want. I think I can say there has been no loss of essential services anyplace. We have no consumer complaint they can't get the kind of services they want. MORE Page 16 MR. SCHMULTS: Thank you. George, could you tell us about your success at the Interstate Commerce Commission in the area of regulatory reform? MR. STAFFORD: Mr. President, I am honored to have an opportunity to follow up our meeting of some months ago. Because the ICC currently is engaged in implementing quite a few significant reforms initiated by our commission or mandated by our recent rail bill, the rail legislation represents a major rethinking and re-evaluation of the Federal controls over the transportation industry. The effect has been to redirect the efforts of the commission, reaffirm the needs for regulation in the public interest and to reinforce the importance of competition in our economic environment. Last July, you established four goals toward which all agencies should strive. The ICC fully supports those objectives and they are and have been always foremost considerations in our policy deliberations. At the end of last year, we apprised the Office of Management and Budget of our activities regarding the four-point program. Our programs are progressing to the point that we are seeing significant results regarding regulatory lag -- our backlog is down, and our output is up. Consumer assistance, though we feel it is very good now, will improve by the creation of the Office of Public Counsel. We are assessing even more carefully the impact of rate changes on consumers. We have added a whole new force to watch for consumer problems in new rates. The economic consequences of regulatory programs are receiving greater attention today than ever before. We have reorganized our whole economic section with specialists in every area, including our continued efforts to make sure the American rural community receives adequate service, to allow the small businessman to remain competitive in the marketplace, to provide the consumer with tools to participate on more equal terms. We are analyzing the causes and extent of empty truck movements and conducting cost benefit surveys on the effects of regulation. In the area of reduced regulation we have a number of activities underway, including a proceeding to remove most rail rate regulation where effective competition exists. The commission is proud of its responsiveness to your four-point program. MORE FORD Page 17 I have with me Commissioner O'Neal of our commission and he and I will be happy to answer any questions. THE PRESIDENT: How are you doing on the gateway problem? MR. STAFFORD: We are doing very well on that, Mr. President. In fact, with the exception of a very few cases that we have been taken to court on and perhaps 15 or 20 major problem cases, we have put out about 30,000 cases in that and we are in the process now of trying to evaluate whether or not -- one of the agencies was trying to decide just how much fuel we were going to save as a result of this and they told us it looked like we would save, as I recall, about 3 million gallons of fuel. THE PRESIDENT: Three million a year? MR. STAFFORD: I believe that was every month, but we are now going out to find out actually what is happening on this. We are asking for their figures before and their figures afterwards. I must admit, this has gone the other way on your other requirement to cut down on reports to be filed, but this is a one-shot affair in order to try to just find out if it really was the kind of a saving, because, if you recall, if it was less than 20 percent circuitry, we let them stop; if it was more than 20 percent circuitry, we said you could not operate that way any longer. We are making very good headway. THE PRESIDENT: I will be very interested in that report because, at the time of the oil embargo, it was called to my attention on several occasions how much in the way of diesel fuel on a particular run they had to waste because of the problem. MR. STAFFORD: Then our favorite word, "backhaul," got involved at the same time on waste of transportation. Of course, backhaul is really a catch word that a lot of people use and it just really means how much empty mileage do these regulated carriers have. Our studies, there are two different studies we have had and it comes up to about an overall 7 percent, but we are spending a whole year -- this year, actually -- going out to weigh stations all across the United States and we are checking very scientifically. We are working with the Department of Transportation and with one or two of the other agencies to have something really worthwhile. So we will know, and you will know, whether our figures have been right or not -- and we want to know. THE PRESIDENT: How soon will you be actually utilizing the new rail revitalization and regulatory reform, if that is the right title? MORE FORD Page 18 MR. STAFFORD: As you know, there are many deadlines and many studies that have to be made. In the rail area alone, we have some 20 studies or definitions that we have to work out. In that bill, it gave us certain time limits we have to work those out. We are on time so far in most of those. We think it is a good bill. We may not think so after we finish making some studies to find out what some things may mean or not mean in the context of running a railroad. MR. SCHMULTS: Thank you very much, George. Dick Dunham, may we hear from you and the Federal Power Commission? MR. DUNHAM: The problem we found ourselves faced with in the last three years is that the number of filings with the Federal Power Commission have increased from 7,200 to 15,315. Now, during that same period of time, the major decisions reached, the resolutions increased by a great percentage, from 72 to 317 but, nevertheless, we are very much at the present time on a treadmill running faster but going backwards all the time. So some of the procedural steps we have undertaken is first to establish a case control system for the Commission itself. It has been alleged by many people that we regulate that some of their applications and filings have gotten lost in the Commission. We found that we could not disprove that complaint. (Laughter) So essentially we adopted a case control in order to get the track of filings. We have adopted what we call a top sheet procedure. Under the former practices every item of an application was subject to the entire evidentiary process and both staff and all intervenors had to introduce testimony on all items of a pending application even though there was no dispute on the facts or anything else. So we have adopted this procedure where, if there is no dispute or difference of opinion in terms of the facts or the issues, or the policies that are involved in a particular application, they will be automatically settled up, which will allow, I hope, to raise to the service the issues probably subject to litigation in a more formal procedure. We are very hopeful that will help. One thing this Commission cannot take credit for -- but we are now seeing fruition from -- is the regulatory agency processing procedures. We expect in 30 days that the number of forms that we require in the regulated industry will be reduced from 50 to 15. That is an even higher proportion in terms of the amounts of information that the regulated industry should furnish to us. It is not combining 50 forms into 15 forms. MORE FORD Page 19 THE PRESIDENT: I was going to ask that. MR. DUNHAM: I anticipated that. Some of the forms required a lot of historical redundant information and we will update that. It is a substantial improvement and, assuming we get it through, I think it will have a very profound effect on the amount of information required from the industry and thereby the means of exchanging information with us. THE PRESIDENT: Why do you have to go to GAO? MR. DUNHAM: Because new forms have to be cleared by law. THE PRESIDENT: I thought it was OMB. MR. LYNN: It used to be that way. There is a little tug of war going on in GAO as to how far the authority extends. THE PRESIDENT: That was included in the Alaskan Pipeline bill. MR. LYNN: Yes, sir. The Baperwork Commission is showing a great deal of interest in this area and had testimony from us at OMB and from the GAO with respect to the reach as to forms in the regulatories, and a letter did go out from the Paperwork Commission to the heads -- or is about to, I don't know whether it has been launched or not -- asking their cooperation, and I think we should see some real action there. I haven't talked to everyone but the ones I have talked to on the paper matter as such -- which is linked to the whole regulatory process, but in some ways can be attacked separately -- but Ifeel that everyone does want to cooperate. But, as to that, whether the existing relationship is the right one as to the review of forms and what kinds of authority, whether in OMB or some other place, that is an issue. MR. DUNHAM: We are not asking for new sets of information. It is just a different format. We have joint jurisdiction in many cases with States, where the respon- sibility is split. We work closely with the State regulatory agencies and to work out the same information we can proceed on a joint basis. They will have access into our information and we will have access to theirs so we can coalesce it, and I think that will have a real impact. Again, it will be helpful in that both the States and Federal Government can begin with the same basic information instead of disputing whether somebody had a different time period or why the figures are different. I think there will be a great deal of payoff on that. MORE FORD Page 20 Another procedure is what we call effective planning procedure where we solicit the regulated industry, our own staff and the general public on issues that they see coming forward. The attempt here is to get us away from considering solely the case-by-case analysis. It appears to us that, when you examine each case, when you argue each case, when you analyze it and everything else, the ultimate resolution of the case has many, many factors of law, economics and everything else and it is hard to pick out the theme, the policy theme that runs ahead of it. Now if we can establish this process, if we can set policy guidelines, rule-making guidelines, whatever, where the regulated industry and everybody, the general public included, will have an idea of the guidelines, the type of things, the range of area instead of being, as it appeared to us, being caught in looking at each case, weighing the different factors involved in each case maybe differently or inconsistently with preceding or future cases. We have undertaken or hope to undertake an organizational study of the Federal Power Commission. There has been, that we can see, no major rethinking of how the Commission itself was organized since about 1950. So we think it is about time to look at the approach of the organization. Other measures that we have taken to improve public perception of the Federal Power Commission, we have agreed and have held meetings in other places, and Washington, D. C., to try to get a feel. We expect to continue that. We are also experimenting with -- it is a difficult legal matter -- holding joint proceedings with State regulatory commissions. Frequently in major hydro site applications, for instance, both the State has certain powers and the Federal Government has others. Sometimes the resolution of matters are much delayed. It is a difficult area but we are trying to work out ways to accomplish that. We have decided to, and did adopt a resolution to open our public meetings to the general public for observation. That is on all nonprotected matters. There are a lot of items that come within the Privacy Act but the nonprotected areas will be discussed in a public forum so they can see how we arrive at decisions. MORE FORD Page 21 To go to your third section that you asked us to comment on, and for the problems that we see coming up, the primary one is the natural gas situation. We are in almost a very difficult position, as you are very well aware, of trying to attract to the interstate market gas which, under our rules, under our process is priced at about a third or fourth the price of nonregulated gas. It is a difficult matter and we have not been that successful in adding additions to the interstate market. Aside from the new gas price situation, leaving that aside for a moment, it seemed to us it would be very helpful if the law were changed, either added to or changed slightly in the definitions under which we now operate, because the constraints that we operate under, our Natural Gas Act was adopted in 1938, and hundreds, if not thousands of cases of litigation, many in all kinds of superior courts, many, many in the Supreme Court, which limit and constrain the elements we can take into account in changing this equation. We cannot, except to a limited extent, take into consideration price factors, market factors, costs of alternative fuels, things like that, so that is a very difficult thing. So, quite aside from the question of whether price regulation should be discontinued, it would be most doubtful unless there was some change that would give us the latitude to perhaps begin again. MR. SCHMULTS: I think we are going to have to step up the pace a little to keep on schedule. Carl, could we hear from you next? MR. BAKKE: Mr. President, when talking about the subject of regulatory reform, I think we need to distinguish between administrative reform and substantive reform in the administrative process. Administrative reform, by and large, is susceptible of unilateral action by the agency whereas substantive reform is a matter that is in the hands of the Congress, by and large. What I would like to do today is to discuss the two conference topics in those terms. I think in doing so our most significant reform effort has been in the administrative side through creation of an internal committee on expediting the hearing process. That is under the guidance of Vice Chairman Morse, who is sitting right behind me today, one of our administrative law judges, the Commission's secretary and the deputy commission counsel and the hearing counsel. We are publishing a proposed public procedure reform in the Federal Register and inviting comments. MORE FORD Page 22 This committee has been active since its inception and some of its recommendations to date have resulted in the promulgation of sensitive target dates, the sequential steps, discussion and final decision in commission proceedings, decisions and interlocutory appeals. In addition, there have been amendments to the Commission's General Order 16 which includes establishment of a date by which evidentiary hearings before administrative law judges shall commence filing of complaints and motions, specification of what must be contained in pleadings in matters subject to the Commission's expedited procedures, and early commencement of first round discovery and establishment of uniform procedures, such as depositions, interrogatories, demands for production and request for admissions. There are additional procedural reforms that the committee has proposed and I would hope in the very near future to see those promulgated, as well. These include pleadings comparable to those required by many district courts for the purpose of narrowing the issues and identifying statute or case law. Also under consideration are special expediting procedures for domestic rate cases and liberalization of authority of our administrative law judges to interpret or modify commission orders of investigation in light of circumstances arising as the proceeding goes forward. Finally, requirements of a more detailed specification at the outset concerning terms and conditions of proposed joint agreements by ocean cargo carriers or others. So that, in a nutshell, I think, are the salutory consequences of the Commission's attention to areas that are susceptible of its own initiative. There are other more serious problems of a substantive nature that, much as we would like to institute reform, we would require legislation and I think the most difficult single problem and the most persistent problem that we have with respect to regulatory reform is the fact that the Congress has not yet established a comprehensive national transportation policy. The result of that is that the agencies find themselves at cross-purposes or even in situations of head-on conflicts, as in the case of ICC Docket 261, that I am happy to say was resolved by amicable negotiation rather than litigation. But a year ago at this time it didn't look quite as promising. MORE Page 23 Moreover, the shipping laws that we are charged with administering today just don't take into account present day technology and, again, in the context of a national transportation policy, this creates a great many difficulties. For example, ocean carriers may absorb inland transportation charges to permit containerized traffic to go to a single staging area rather than requiring the vessel to go into many ports in the same area. This is done for many practical reasons because, if they can get all their containerized ocean cargo into a single staging area, the costs required for handling containerized traffic can be minimized. Now, this particular issue of absorbing inland transportation charges is a major issue in a substantial number of cases before the Federal Maritime Commission at this point. This involves the so-called mini-bridge, maxi-bridge, land-bridge modes of transportation which puts us over into the ICC's area of expertise and I am sure George will say regulatory peremption but, be that as it may, it is a serious problem and the question before the Commission, very frankly stated, is whether absorbing inland transportation charges under circumstances I outlined are a violation of the shipping statute or permissible within a rank of construction of the statute at the outer end of the spectrum. The consequence is that the Commission staff and, above all, the shippers and the carriers and ports and hangers-on in general, are spending an exorbitant amount of time and do not reflect the impact in the real world of technology. In this case, it is the containerized ocean cargo but there are others as well. Containerization also impacts on port development and internal facility plants because of the capital intensive nature of the shore areas needed. If there is a tremendous area of economic impact that is absorbing an inordinate amount of time of our agency, and I am sure the ICC and perhaps even the Civil Aeronautics Board, it arises out of the fact the statutes we are charged with administering are archaic. THE PRESIDENT: Let me ask this, Carl: Is the Commission or are the related commissions preparing for submission to the Congress new legislation that would meet the current requirements and related matters, or just doing nothing? MORE FORD LIBRARY Page 24 MR. BAKKE: No, sir. Speaking for the Federal Maritime Commission, we are setting in motion a comprehensive and searching review both of our statutory authorities and the regulations we have promulgated to implement those authorities specifically with a view to updating them and stripping away the anachronistic or archaic features of our basic authorities, perhaps of necessity adding additional statutory authority to optimize our functions in the real world of today. I think by the beginning of the next session of Congress we will be in a position to come forward with a number of proposals in that respect with the benefit of Mr. Lynn's good office in clearing off on them. MR. SCHMULTS: Thank you. Cal, could we hear from you and the Federal Trade Commission? We will have to cut the next three presentations rather short as the President has a bill signing ceremony outside. Please be as brief as possible. MR. COLLIER: Mr. President, Lou Engman, as one of his last acts as Chairman of the FTC, wrote to you about some of the specific steps that are being taken by the Commission that relate to your four-point program for regulatory reform, which I should add, we fully endorse. Looking forward, I am hopeful the Commission's efforts at cost benefit analysis can be institutionalized and expanded. This kind of analysis, done correctly, is no easy task. Equally difficult is the job of educating the staff within the agency as to how to build high quality analysis into their thought processes and recommendations. This has to be used to predict the effects of proposed regulations and other actions and also to monitor and evaluate in retrospect what the effects of such actions were. Regulators can't be allowed to bury their mistakes in the Code of Federal Regulations. I have been particularly encouraged by reports on a program that began when I was general counsel. This program was designed to scrutinize the inventory of our accumulated trade practice rules and guides dating back decades to determine whether they should be rescinded. To date, and after public comments, 61 such rules and guides have been reviewed and over 90 percent revoked. Another 90 or so will be going through the same process in the coming months. Your call for competition as an alternative to economic regulation is sweet music to the commission's ears. We believe that is what the FTC is all about. MORE FORD Page 25 Pt rhaps the most attractive areas for reform are regulatory (elay and consumer under-representation. As we are ofter reminded by the Bar and occasionally the courts, one man's delay can be another marr's due process. We have made progress here both by changing our procedural rules and by better management, and that has resulted, for example in a 33 percent reduction in the average age of pending investigations during the last year. Effective consumer participation in commission proceedings is made very difficult by the high costs that such participation entails. And although we are open to suggestions from sister agencies who face similar problems, I confess that we don't yet have all the answers on that one. MR. SCHMULTS: Thank you, Cal. Dick Simpson, may we hear from you on the Consumer Product Safety Commission? MR. SIMPSON: Our commission is about three years old and we have authority over about 10,000 products. We have undertaken several initiatives over the last three years to increase and involve consumers in our activities and it works throughout our agency. We have a meeting policy that requires every meeting with any official in our agency, down to the lowest level, with outside parties to be open to the public, to be announced in advance, and anybody in the United States is invited to attend. It really does work and isn't very expensive. Generally, no one else shows up but there is no speculation as to what went on and what arm-twisting there was. We have also had very effective volunteer efforts from consumers. We asked for help and have trained over 4,000 citizens from all walks of life, retired citizens and students who have helped in surveillance projects in industry. We have tried to improve our ability to set priorities in a rational way and measure cost of the activities we undertake and the benefits. We have not completed our estimates on that job, but we stand behind our estimates. The regulations by the industry that will be completed this year will prevent about 65,000 injuries this year, and included in those are injuries by ingestion of aspirin by children; a similar reduction in deaths of children under age 5 in prescription medication deaths. We have undertaken from the outset several activities to encourage self-regulation. I particularly believe in that. I am not cut out to be a regulator but here I am. We have encouraged our technical staff -- technical and scientific staff, to participate in activities. They have been doing that for three years. It does not infringe on our ability to regulate. FORD MORE Page 26 We have been citing voluntary standards that have been developed and are being followed. We are pleased to do that. The apparel industry is one that Jim is aware of from our mutual time in Commerce with the Inflammable Materials Act. The apparel industry has not only gone way beyond the Federal efforts -- we have mandatory regulations on children's sleepwear -- they have extended voluntarily the fire retardant regulation to other apparel. In my personal opinion, there is no longer any need for any additional mandatory standards in this field. In three years I wouldn't have believed it possible. It is an example of what can be done. In deregulation, I think last July Lou Engman was the first speaker and he suggested if there was a trap door under about 50 percent of the chairs and somebody pulled a lever -- and we have been working on efforts in a sense to fashion our own trap door. We have put together a plan, a six-year plan, and we have submitted it last September to OMB and the Congress and that plan predicts the ability to abolish this agency, an agency only three years old, in six more years. It would abolish it because we believe our task is a finite task and we believe rational people would come to the conclusion consumer products no longer present a grave risk. It is a bit of a change and we haven't gotten acceptance of it, but I would suggest that every agency put forward such a plan because not only is it beneficial to keep from going into a counterproductive mode but it makes possible some meaningful oversight by the Congress. Right now I am of the feeling the oversight is not very meaningful. On another line, I might mention we share in common with Bill Anders -- our agency does, FDA and OSHA, and some of the other agencies not here -- that is, nuclear safety, similar problems -- fluro-carbon ozone, Red Dye 2 and Red Dye 40 -- the whole matter of carcinogens associated with the environment. I have been trying to create a mechanism called a science court as a regulatory forum to help agencies make better social decisions in these kinds of areas. The social decision is, how safe is safe enough and is the risk worth it. Implicit is economic risk, and risk to citizens. But in these problems I have outlined, they are the kind of areas where the technology is very, very important and the technology is being debated in the public domain and we are getting trial by PR. MORE FORD Page 27 Secretary Morton was briefed on this. I talked to Ed Schmults about it and Secretary Morton was briefed and I was hoping he would introduce it before he left. Your Advisory Committee headed by Dr. Raymond and Dr. Baker are aware of it. I would suggest if that court were in existence today, it might influence the nuclear initiative in California. The Westchester County Board of Supervisers unanimously recommended such a science court be convened to investigate Plant 3. I have discussed this with people not only pro-nuclear or involved in it, but involved in the same group are the environmentalists, the anti-nuclear forces from academia, and they also support such a concept. I think it would improve the decision-making process by the agency and, if the citizen is to vote, make it an informed vote. MR. SCHMULTS: I think that is a very interesting proposal and we are looking at that. It has been extremely helpful. John, may we hear from you? MR. ROBSON: Very quickly, Mr. President, in the area of procedural reform and education, we created last summer a procedural forum, an outside advisory group to which we gave a six-month deadline and they met it and gave us recommendations. The committee then went out of business. We have their reforms under consideration and have implemented some of them; for example, imposing on ourselves a deadline of a number of days in which we have to act in rule making petitions filed before us. Second, we have underway a system under which we will be able, through use of our computer, to log in and chart through the agency every single action that is filed with us and to set a deadline up the ladder so that, if it hasn't gone from point A to point B by the time it should have, we want to know why and move it out. Third, in the area of burdensome reporting, we have had underway for several months a review of all our reporting requirements. I will mention a couple. One, we have reduced for the air freight forwarders by 14 forms a year and by 75 percent the reporting requirement. Most are small businessmen. Second, we are working with the Federal Aviation Agency to have a single reporting to satisfy both agencies so they need file only one report to satisfy both of us. MORE FORD Page 28 We are trying to reduce extensively the burden on people to get a charter program started. In the last several months we have made some great strides in the charter areas. We introduced two brand-new charter forms and proposed another; each significantly liberalizes the opportunities for cost of charter transportation for the American people. We are pursuing an aggressive competitive route program as well as trying to push the forefront out in the area of removing restrictions on carriers that are obsolete and unnecessary. We have allowed a great many discount fares to go into effect in the last several months and there is, indeed, such proliferation now that people are confused by them. In the areas of consumers, the CAB has had a consumer office since 1970 and I think it does a pretty decent job. Our movements in that area have been on specific matters; for example, the excess baggage charges and free baggage allowance, increasing the free baggage allowance on international flights. We have now pending a rule making to require the carriers to disseminate some tariff information so the ordinary consumer has a better idea what the fares are and how he can better avail himself of the cheapest one. We are struggling with the knotty problem of bumping, which is small in number but great in voice. Finally, in the area of economic analysis, we testified this morning on the regulatory reform proposals that are before Congress now. We have really been in the process of analyzing the future of the Board for several months and, let me just read the first sentence of our testimony. It says, "Economic regulation should be redirected so domestic transport is governed by competitive market factors." We have offered a program to Congress. I will leave it there. MR. SCHMULTS: Thank you very much, John. THE PRESIDENT: Thank you very much, all of the chairmen and your associates from the various boards and commissions. Unfortunately, I have to proceed with a signing ceremony of legislation, so I won't be able to stay. I have asked Ed Schmults to indicate to you what I would like in the months ahead. Your testimony today has been very helpful. I think we have made significant progress. It is my feeling we have to keep pressure on in order to further, at this time, the progress. MORE FORD ; Page 29 I appreciate your appearance. I am grateful for what has been done but we hope to see you in a few months and get additional reporting as to the success of your subsequent efforts. I thank Ed and Paul for their leadership in this and, if you will excuse me, thank you very, very much. MR. SCHMULTS: I would like to reiterate what the President said. I thank you all very much for all the work you have put into this meeting, each of you. We could have taken up an hour and a half with the problems and progress that each of you has made in your own agencies. To keep the momentum going on this effort, the President asks if you would submit to him by September 15 another progress report on your efforts to achieve improvements in the four areas concerned that he has mentioned. Those were the subject of your reports. He has three specific requests he hopes you will keep in mind as you prepare your next report; first, that special consideration be given as to how we can make your progress--and our progress in the Executive Branch--as well as our regulations more understandable. For example, when you report on how you are eliminating or improving your regulatory functions, the President would like to see a specific statement on how the change will affect consumers, small businessmen and taxpayers. Second, if you would, the report should list and discuss priorities for agency reforms. Along with the priorities should be recommendations on where regulatory objectives can be achieved in a less costly, less time- consuming and more efficient manner. If we are going to show results to the American people, we need to have a better idea of what our priorities are and how we are going to accomplish them. One of your first priorities should be where there is workable competition or where competition could be increased if outdated regulations were eliminated. Third, the President asks all of you to concentrate along with the Executive Branch agencies on achieving a 10 percent reduction in the number of forms that Federal agencies require. It has been said that our continued requests for information cost individuals and businesses billions of dollars in expenses every year. The cost of paperwork cannot any longer be considered an incidental cost. Many small businessmen have pointed out it isn't worth it for them to hire two people in their business whose efforts are directed toward filling out of forms instead of selling products and services. MORE FORD Page 30 The Committee on Paperwork is looking on the long- term approach of reducing costs of paperwork. The President has directed the Executive agencies to achieve a 10 percent reduction in number of forms by July. In your September 15 report on your administrative reforms, he hopes you can also report on your contribution to achieving a reduction in reporting requirements. Let me say certainly on this side of the table we are all convinced that all of us here and all of you are working toward the goal of making the Federal Government as responsive and efficient as humanly possible. Thank you. We appreciate it. END (AT 3:40 P.M. EST) FORD C.C. Teach THE WHITE HOUSE WASHINGTON April 13, 1976 MEMORANDUM FOR: BOB HARTMANN FROM: ED SCHMULTS EU The President has tentatively agreed to address the Chamber of Commerce on April 26, 1976. I do not believe that any final topic for that address has been chosen. As you may recall, his address last year before the Chamber (which was on April 28, 1975) was the first major outline of his regulatory reform program. Since that time, we have achieved considerable legislative and administrative progress. As the one year anniversary of this address, I believe it would be appropriate and useful if the President returned to the Chamber of Commerce and outlined the results that have occurred, and the bipartisan support he has received. Also, it would be extremely useful to use this forum to announce the long term regulatory reform action program which will lead to fundamental reform in the government's role in the economy. If you agree, I will provide a first draft of the address by Saturday, April 17, 1976. cc: Dick Cheney Jim Cannon Bill Seidman FORD & LIBRARY GERALD OUTLINE OF PRESIDENTIAL REMARKS ON REGULATORY REFORM - Exactly one year ago this coming Wednesday, I outlined before you my program of regulatory reform. - Since that time, we have made important progress in this critical area, progress that moves us towards an open and vigorous free market, less paperwork, more intelligent regulation and more opportunity for businessmen to run their own businesses. However, we have a long way to go. - I want to outline our successes, the current Congressional and Administration cooperation and new directions that will further our goals. - The goals of my Administration in regulatory reform are: - to make sure that government policies do not infringe on individual choice and initiative. - to reduce government intervention in the market place. - to find better ways to assure that scarce economic resources are used most efficiently so that we fulfill our desirable social goals at minimum cost. - to improve our ability to ensure that public expen- ditures benefit the public as a whole and that govern- ment policies are equitably enforced. - to make sure the public interest rather than special interests benefit from government programs. - We have had some outstanding successes: 1. We have reversed the trend of paperwork growth and I can announce that we will have a reduction of 10% in the next few months. 2. I have met twice with the Independent Regulatory Agencies and they are demonstrating increasing progress in reducing delay and unnecessary regulations - (cite examples). 3. The first lessening of ICC regulation of the railroads since the creation of the agency in 1887 has been signed into law and I have introduced the first major reform of airline and trucking regulation since the 1930s. 2 4. The Senate has passed the Financial Institutions Act which is the most sweeping reform of banking reg- ulation in over 40 years. 5. We have achieved the first competition in the secur- ities markets in almost 200 years. 6. We have repealed the fair trade laws which were on the books for over 40 years and which unnecessarily held prices up for the American consumer. 7. Etc. - The Congress has begun to take this issue seriously and we have made important bi-partisan progress. Last June, I met with 24 Congressmen and Senators, Democrat and Republican, and we agreed to work together on the common problem of unnecessary regulation. (Mention specific Congressmen and Senators, e.g. John Anderson, Percy, Kennedy, Jordan, etc.) - This Administration will not rest on these results. Even though they are far in excess of what our critics thought possible. - I have commissioned several task forces to examine and im- prove OSHA and other agencies' regulatory processes which have been particular problems in the past. - Finally, I am announcing that my Administration will shortly be submitting legislation to fundamentally review the impact of the government on the economy and on business. However, this won't be just another study. It will result in action -- legislative and administrative. The President and the Congress will be required to take action to resolve these problems. - Together we must work toward reforming government. Busi- nessmen, consumers, and the government must take the long view. Our economy can grow only if the government is not part of the problem but is part of the solution. - Etc. and closing. THE WHITE HOUSE WASHINGTON April 19, 1976 MEMORANDUM FOR: BILL SEIDMAN ED SCHMULTS FROM: STEVE McCONAHEY sem SUBJECT: Regulations Review It is my understanding that the regulatory reform effort is beginning to focus on the regulations of the Federal depart- ments and independent agencies. Given the fact that these regulations have a major impact on state, county and local government, I would like to raise the intergovernmental dimension of regulation reform and offer some suggestions on the approach to this problem. Two of the Administration's major themes have been the re- duction of excessive government, and the return of essential decision authority to state and local governments. The block grant initiatives, revenue sharing, the regulatory reform legislation are existing actions in support of these themes. However, there has not been to date a sustained government- wide effort to overhaul the maze of burdensome regulations that prescribe to state and local officials how Federally- supported programs are run. In most instances, these regulations increase the cost of Federal assistance programs, complicate their administration, and impose unwanted features. To many governors and mayors, the burden of these regulations seems to outweigh the benefits of the programs. Based on our intergovernmental perspective, and on the observa- tions that state and local officials have made on other White House or agency reviews and studies, I offer the following recommendations for the next phase of regulation review: 1. Focus the review effort on regulations surrounding Federal assistance programs. The majority of agency administrative regula- tions deal with Federal public assistance programs and largely affect the delivery of such diverse services as health care, income support, food starips, job training assistance, and housing. - 2 - These are highly visible programs that impact on the great majority of the American people. The regulations for administering these programs are, in many cases, adversely affecting the ability of state, county and local governments to deliver the needed services. As stated in a recent National Journal article: " overly detailed administrative regulations in many areas not only fail to achieve their purposes but fail precisely because of the bur- dens they place on state and local management. " My review of the "targets of opportunity" being reviewed by the EPB suggests a continued focus on regulations affecting the private sector and the consumer. As an alternative, I believe we must focus the major portion of our efforts on the domestic assistance program regulations - if we do not, we will be over- looking one of the major contributing factors to excessive government and bureaucracy. 2. Provide full-time, sustained White House oversight of in-depth, priority agency reform efforts. The regulatory reform effort to date has been essentially the work of a Domestic Council review group coordinating specific legislative projects and monitoring agency regulation activities. The performance of the departments and agencies in re- viewing their own regulations has been, however, uneven and sporadic. Moreover, because of the focus of the work to date, and because of limited resources, the review group has not been able to devote full time to this effort. Given the unique management and bureaucratic problems associated with the regulation of domestic programs, I believe that we must approach this reform effort quite dif- ferently than our approach to date. The problems we are trying to overcome have a staying power that historically outlasts the life of any task force or review group. - 3 -- The most contemporary and startling example of this is what is happening to the CETA program: where sound and well-established legislative and administrative simplification and reform is being eroded through the gradual reimposition of old administrative practices and rules. If we are to move beyond identification of reform opportunities to the actual implementation of im- provements, I believe there must be two types of on- going oversight: (a) Full-time White House Oversight. Tough and experienced White House management of this effort will: give the effort a clear Presidential mandate; signal this mandate to the departments and agencies; respond to the criticism of state and local officials, who will give the effort full support if they perceive the effort to be a priority; and, insure the objectives are achieved in a timely and visible manner. (b) Agency Participation and Commitment. The agencies must feel the pinch and be held accountable for the progress of this ef- fort. A critical element of real reform is in-depth agency involvement. Histori- cally, the White House has been ineffective by itself in imposing from the outside the type of reform needed here. It requires agency commitment and full participation. One suggestion is the use of the Under Secretaries as the officials charged with in-house oversight, and who would work closely with and under the White House oversight official (s). 3. Provide for input from and participation by state, county and local officials. No group is more aware of the problems from excessive Federal regulation than those charged with the day-to- day administration of the regulated programs. More- over, these officials collectively represent an effective force to help marshall support for these reforms, particularly where legislative adjustments are required. The participation of state and local officials is essential, both substantively and politically. - 4 - At the same time, we must avoid a "mess chart" situation with a tangled maze of ongoing reform efforts. Already a number of agencies have initiated regulation review efforts, including HEW, Treasury, FEA and EPA. Secretary Mathews, for example, has initiated three task force ef- forts with the New Coalition, two of which pertain to regulations. Secretary Simon has initiated selective projects with the National Governors' Conference (NGC). Most recently, Jim Lynn com- mitted to respond to priority management and regulation issues identified by the NGC. For these reasons, I recommend that this effort include the following elements: Inputs from state and local officials to help focus the effort (perhaps through an advisory committee, with members like Governor Dan Evans). Coordination and encouragement of reform work presently underway in the agencies, thereby avoiding du- plication of efforts. Channeling of inputs from state and local officials, and their public interest groups, to avoid overloading their capacity to respond. Summary The achievement of the President's goals of reducing big government and rebalancing federal-state relations requires that we focus much of our regulatory review effort on public assistance programs, and that we directly involve the officials responsible for the administration of these programs in the departments and agencies. We must have strong, full-time and sustained commitment both at the White House and at the top leadership of the agencies. And, we must orchestrate the various efforts now underway to maximize the input from state and local officials. - 5 - Given the intergovernmental charter of my office, I am available to provide whatever assistance I can to achieve these objectives. I consider this a problem area of the utmost urgency, one that we can make quick and visible progress with, and which, if properly approached, will measurably accomplish the President's commitment to re- duce the burden of the Federal government. I would like to have an opportunity to discuss this memorandum with you.

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    "ocrText": "The original documents are located in Box 29, folder \"Regulatory Reform (10)\" of the James\nM. Cannon Files at the Gerald R. Ford Presidential Library.\nCopyright Notice\nThe copyright law of the United States (Title 17, United States Code) governs the making of\nphotocopies or other reproductions of copyrighted material. Gerald Ford donated to the United\nStates of America his copyrights in all of his unpublished writings in National Archives collections.\nWorks prepared by U.S. Government employees as part of their official duties are in the public\ndomain. The copyrights to materials written by other individuals or organizations are presumed to\nremain with them. If you think any of the information displayed in the PDF is subject to a valid\ncopyright claim, please contact the Gerald R. Ford Presidential Library.\nDigitized from Box 29 of the James M. Cannon Files at the Gerald R. Ford Presidential Library\nTHE WHITE HOUSE\nWASHINGTON\nApril 6, 1976\nMEETING WITH THE RECULATORY COMMISSIONERS\nThursday, April 8, 1976\nThe Cabinet Room\n2:00 PM (60 Minutes)\nFrom: Edward Schmults DD\nI. PURPOSE\n- To meet with the Chairman and one other Commissioner from\neach of the ten independent regulatory. commissions.\n- To continue the dialogue on administrative reform of the\nregulatory commissions that was started July 10, 1975 at your\nmeeting with the commissioners.\n- To review the progress reports received from the agencies\nand to discuss plans for future reform within the agencies.\nII. BACKGROUND, PARTICIPANTS, AGENDA, AND PRESS PLAN\nA. Background:\nThe importance of administrative reform within the ten independent\nregulatory commissions was highlighted at the July 10, 1975 meeting\nwith the Commissioners. At that time you asked the agencies to\nconcentrate on a four-point reform program to:\n1. Improve economic analyses of proposed or existing regulations;\n2. Reduce delays and backlogs;\n3. Increase representation of consumer interests; and\n4. Increase reliance on competition wherever possible.\nFORD\n-2-\nProgress Reports. Each of the agencies has submitted a report\non its efforts in these four areas. A summary of these reports is\nattached at Tab A. Although several agencies have taken significant\nsteps toward improvements, there is still much work to be done.\nContinued interest in achieving significant reforms needs to be\nreinforced through discussion of agency progress and future plans.\nObjectives of the Meeting. The meeting is designed to be a\nsmaller working session than the meeting last July. Each Chairman\nwill be asked to discuss his agency's most significant reform effort\nand his most persistent reform problem. The general discussion\nwill focus on the various approaches to reform and will serve to\nencourage additional needed reforms.\nSeptember Reports. You will ask each agency for a second\nprogress report to be submitted by September 15, 1976.\nB. Participants (Seating Chart at Tab B):\nRegulatory Commissioners\nCivil Aeronautics Board\nJohn E. Robson\nG. Joseph Minetti\nCommodity Futures Trading Commission\nWilliam T. Bagley\nGary Seevers\nConsumer Product Safety Commission\nRichard O. Simpson\nLawrence M. Kushner\nFederal Communications Commission\nRichard E. Wiley\nRobert E. Lee\nFederal Maritime Commission\nKarl E. Bakke\nClarence Morse\nFederal Power Commission\nRichard L. Dunham\nJohn Holloman\n-3-\nFederal Trade Commission\nCalvin J. Collier\nPaul R. Dixon\nInterstate Commerce Commission\nGeorge M. Stafford\nA. Daniel O'Neal\nNuclear Regulatory Commission\nWilliam A. Anders\nMarcus A. Rowden\nSecurities and Exchange Commission\nRoderick M. Hills\nPhilip A. Loomis, Jr.\nAdministration Officials\nThe Vice President\nSecretary of the Treasury, William Simon\nAssistant Attorney General Kauper\nWilliam Seidman\nJames Lynn\nJames Cannon\nEdward Schmults\nPaul MacAvoy\nDaniel Kearney\nPaul Leach\nStan Morris\nC. Agenda:\nOpening Statement by the President\n5-7 Minutes\nIntroductory Remarks by Edward Schmults\n3 Minutes\nGeneral Discussion Including a Statement\nby Each Chairman\n45 Minutes\nClosing Statement by the President\n5 Minutes\nD. Press Plan: To be announced; photo opportunity at the\nbeginning of the meeting and a press conference by Ed Schmults,\nPaul MacAvoy, and one Chairman following meeting.\nIII. TALKING POINTS\nOpening Statement by the President at Tab C.\nClosing Statement by the President at Tab D.\nSummary of Independent Regulatory Commissions Responses\nI.\nImproved Economic Analysis of Regulatory Decisions\nAt the time of your executive order which implemented\nthe decision to require inflation impact statements, all\nten independent regulatory commissions responded that\nthe order by its terms did not apply to them and they\nbelieved their special logislative status exempted them\nfrom the requirements you imposed on the remainder of\nthe executive branch. However, all indicated that such\nanalyses were already being roûtinely performed.\nSince that time, a number of the agencies report that\nintensified efforts have been carried out to improve the\nquality of the analyses used to guide their regulatory\ndecisions. As of January 1, 1976, the CPSC, which is\nrequired by the Consumer Product Safety Act to perform\neconomic analyses, adopted administrative procedures man-\ndating similar analyses for actions taken pursuant to\nall the statutes it administers (e.g., Federal Hazardous\nSubstances Act, Poison Prevention Packaging Act). The\nnewest of these Commissions, the CFTC (established in\nApril 1975) has adopted economic analyses as a means for\ndeciding whether certain futures contracts should be\nlicensed. The Commission has decided that unless it can\nbe proven that trading in any given commodity has a negative\neconomic effect, licenses for trading that good ought to\nbe, and have been, granted.\nCongressional mandates have also required the SEC to do\na thorough cost analysis of stock exchange rules which\nmay prohibit competition. The SEC has recently used this\nauthority to recommend the removal of one of the major\nremaining trading impediments. Likewise, the Energy\nPolicy and Conservation Act which you signed last month\nrequires FPC, ICC, CAB, FMC, and FAA to identify those\nlaws or regulations (administered by them) which cause or\npermit the inefficient use of energy. Within a year, each\nagency is required to report to Congress on the rationale\nfor continuing such a requirement.\nThe NRC advises that it has adopted across-the-board\npolicy quidelines calling for impact/value analyses, and\nhas created two top level staff committees to review\nall such work. The ICC has reorganis. to place greater\nemphasis on analysis, and during 1976 it intends to\nevaluate its temporary decision (made in 1975) to allow\ntrucks greater routing flexibility. It will also conduct\na nation-wide survey to determine to what extent ICC rules\nFORD & 9ERALD LIBRARY\n2\nrequire trucks to travel empty or with partial loads\none to existing \"backhaul\" regulations. The CAB is re-\nevaluating the important indices it uses (e.g., passenger\nload factors, corporate rate of return) in order to make\ndecisions on airline rates, and intends to concentrate\nmore on quantifying the trade-offs implied in reaching a\ndecision on the balance between price and quality of air\nservice.\nThe FTC has put economic analyses to work to determine\ninternally how staff resources should be assigned to its\nmany programs. The Commission notes that it is increasing\nits use of such analyses to determine whether or not to\nissue any given complaint, and has begun to adopt a related\ntechnique to examine proposed business mergers for possible\nantitrust implications. The Commission provided no\ninformation on the use of this analysis for its controversial\n\"line of business\" reporting requirements.\nThe FMC indicates that it intends to collect substantially\nmore data from shipping companies in order to better\ndetermine whether existing FMC rules are adequate. Until\nrecently, the FCC has concentrated its economic analyses\non ratemaking decisions for telephone, telegraph or\nsatellite communication. Although it is using cost/benefit\nanalysis internally to help make decisions on the relative\nimportance of its many regulatory programs, it seems less\nable to quantify the costs and benefits which impact on\nconsumers and licensees in the broadcast (radio, TV, etc.)\narea of jurisdiction.\nII. Reducing Regulatory Delays\nThe problems of regulatory delay have been particularly\nacute in the agencies controlling the energy and trans-\nportation industries. Chairman Anders of the NRC indicates\nthat his first priority will be to reduce the time required\nfor licensing safe nuclear power plants. As two means to\nreaching this objective, NRC has begun to approve standardize.\nplant designs and has signed letters of understanding with\nother Federal agencies (EPA, Interior, FPC) to permit con-\ncurrent licensing procedures. Reduced approval time should\nhelp to reduce the costs of construction and financing,\nand attract more utilities to the use of nuclear power.\nThe FPC reports that it plans to make greater use of\nautomatic data processing, standardized reports, and\ninformal hearings to speed up its consideration of license\nand rate cases.\nFORD & GERALD LIBRARY\nBoth the ICC and FHC report that they are relying TOTAL\non informal hearings and more clearly defined authorities\nwithin the Commissions' offices to help reduce the number\nand complexity of cases which the full Commission must\nconsider. FMC states it has adopted a set of internal\ndeadlines under which its staff must now work, and the\nICC states it will make greater use of computer technology\nto standardize case formats and manage the flow of infor-\nmation through the entire decision process. The CAB is\nevaluating an Advisory Committee's report which calls for\nidentifying the most meaningful information necessary to\nmake decisions and eliminating many marginal data require-\nments.\nThe SEC is required by law to respond within a certain\ntime frame to companies seeking to register new securities,\nand the Commission has set an internal objective of\nreducing the time required to identify and later process\namendments to companies' initial filings. Chairman Hills\nhas also just announced a 12-18 month review of all SEC\ndisclosure requirements to determine what improvements\nin the current 40 year old system are necessary.\nThe FCC has begun implementation of reduced reporting\nrequirements and machine processing of application forms\n(particularly for smaller firms) in order to devote most\nof its resources to larger, more complex filings. While\nthe CFTC did not feel that delay was a problem in its\noperations, it has attempted to develop procedures from\nthe outset which will permit the large majority of small\nfirms to continue \"business as usual\" without the burden\nof exceedingly complicated and time consuming reports.\nThe FTC states that it has begun to codify a number of\nprevious decisions in both the consumer protection and\ntrade regulation areas in order to assist its staff ::\nmake initial determinations in situations brought to their\nattention. Both FTC and the CPSC report that decentrationing\ncertain authorities to their field offices will provide\nmore timely and responsive decisionmaking, however, there\nhas not been sufficient time in which to evaluate these\nmanagement changes. In addition, CPSC is attempting =0\ndevelop a set of priority indicators to help in responding\nmore efficiently to the many petitions filed with it every\nyear. Speedier CPSC decisions on petitions should help\nreduce manufacturers' uncertainty concerning compliance\nof their products.\nFORD & LIBRARY GERALD\nIII. Increased Consumer Representation\nSeveral independent studies have pointed out that con-\nsumer representation practices throughout the Executive\nBranch require improvements. You have asked Virginia\nKnauer to coordinate the Departments' and agencies'\nplans for change. In addition, the ten independent\ncommissions are taking a variety of steps to bring\nconsumer interests more into focus.\nThe ICC and CAB each have independent offices of Public\nCounsel whose responsibilities include arguing consumer\nviewpoints during the Commissions' hearings. The FTC\nhas been authorized funds to help consumer groups pay\nfor legal representation in Commission rulemaking\nproceedings and the NRC has a similar proposal out for\ncomment. The FTC has also devoted substantial resources\nto its consumer protection activities, which include the\nidentification of false or misleading business practices,\nadvertising, etc. The ICC also reports that it will be\nconcentrating more attention ón consumer complaints filed\nagainst moving and storage firms.\nThe CPSC largely operates \"in the open\" by requiring the\nschedules for all business meetings and hearings to be\npublished and by allowing the public to attend. The CFTC\nhas adopted similar guidelines, but points out that public\nparticipation has been minimal during its first year of\noperations. Likewise, the FCC has opened up many of its\nmeetings, has conducted a number of regional hearings,\nand has begun to publish a consumer oriented synopsis\nof pending cases and final Commission decisions.\nThe SEC does not now, nor does it feel that it should,\nrepresent individual investors in cases involving\npotential or actual violations. However, the Commission's\nmandate to protect the interests of all investors has\nlead it to adopt a number of rulings dealing with approved\naccounting procedures for publicly distributed financial\nstatements. The Commission has a continuing effort under-\nway to identify lost or stolen securities. Also, it\nindicates it is beginning to work with the industry's self-\nregulatory organizations to develop a model code of\ngrievance procedures to be used in handling investors'\ncomplaints.\nThe FMC reports that one of its major consumer initintivos\nis to push for logislation which would bring all intermodal\nor container shipments under the jurisdiction of one\nFORD is LIBRARY 9ERALD\n5\nCommission. At the present time, the ICC and FNC share\nresponsibility for regulating cargo that moves both on\nland and by water. Although there is a major question\nas to whether any regulation of these movements is\nnecessary or desirable, the present dual stewardship of\nintermodal traffic creates burdensome and costly\nduplication of paperwork and approvals.\nThe Federal Power Commission states that it regularly\nentertains consumer briefs and has begun a program to\nsolicit more opinions from State and local regulatory\ncommissions whose jurisdictions would be affected by\nFPC decisions.\nIV.\nIncreased Competition as a Substitute for Requlation\nThis element of the Commissions' plans may have the\ngreatest potential significance for achieving your\noverall regulatory reform objectives.\nChairman Stafford of the ICC has openly and vigorously\nopposed your rail and truck reform legislation, and the\nCommission's formal report does not repudiate that\nposition. A Blue Ribbon Panel of the ICC has recommended\ncertain rule relaxations covering commercial zones and\nterminal areas, certain \"no-suspend\" pricing policies,\nand the definitions of exempt commodities, but these\npositions do not address the more fundamental questions\nof route and rate competition which your legislation\nseeks. Both the ICC and FMC contend that more detailed\ninformation on carriers' costs and revenues and stream-\nlined internal procedures will enable them to make better\ninformed, and more timely judgments about the legitimacy\nof rates. CAB has stepped up its consideration of new\nroute awards for some airlines, but SC far has refused\nto comment on your air bill.\nIn contrast, the SEC has actively supported the Adminis-\ntration's desire to introduce greater competition into\nthe securities markets. An SEC order in May 1975 abolishing\nfixed commission rates antedated your signing legislation\naccomplishing the same purpose. The SEC has recently\nruled that several anti-competitive rules of the New York\nStock Exchange must be removed, and is under Congressional\nmandate to examine and rule on other similar provisions.\nThe Commission will be working over the next few years\nto establish a truly competitive National Securities\nMarket.\nDERALD FORD LIBRARY\nThe FPC, under Chairman Nassikas, supported decontrol\nof the price of new natural gas with appropriate\nmonitoring and safeguards. While Chairman Dunham has\nnot yet completed formulation of a legislative program,\nFPC has moved during his tenure to allow large industrial\ngas users to purchase their supplies directly from\nproducing fields at intrastate rates. This action has\nthe effect of partial deregulation of natural gas prices,\nsince intrastate rates in most States more closely\napproximate the true market price for gas.\nThe FTC has major responsibilities to enforce the\nantitrust laws and will be devoting more resources to\nthose programs over the coming year. The Commission has\ntaken a number of steps to begin opening up competition\nin areas which have traditionally lacked such competition,\ne.g., advertising for prescription drugs and eyeglasses,\nprofessional medical fees, and real estate brokerage.\nThe Commission has also recommended to Congress that\nthe legislation allowing milk price fixing by large\ncooperatives be reviewed in light of its substantial\nanti-competitive effects.\nAlthough the FCC's report contains some comments on\npossible changes in cable television regulation, the\nCommission's major initiatives to open up competition\ncontinue to be in the common carrier (e.g., telephone\nand telegraph) industries. Several recent rulings have\nopened up greater opportunities for satellite services,\nand have given manufacturers of interconnecting telephone\nequipment (e.g., computer terminal hook-ups) the\nopportunity to bid against existing manufactures who have\nheretofore enjoyed government protection.\nThe CFTC cites the fact that it has authorized futures\nmarkets for several new commodities and financial\ninstruments, and reports that its negative economic\ncriteria are being used to place the burden of proof on\nthose who object to the opening up of additional futures\nmarkets.\n# # #\nFORD & LIBRARY\nnawrence\nClarence\nDaniel\nMarcus\nRobert\nCary\nPhilip John\nCard\nI'm rance\nKushner\nMorse\nO'Neal\nRowden\nLee\nSeevers\nLoomis\nHolloman\nDixon\nMinetti\nCPSC\nFMC\nICC\nNRC\nFCC\nCFTC\nSEC\nFPC\nFTC\nCAB\nLIBRARY\nFORD is\nGERALD\nBill\nDick\nThe\nBill\nRod\nAnders\nWiley\nVice-President\nBagley\nHills\nGeorge\nDick\nStafford\nDunham\nCal\nKarl\nCollier\nBakke\nOval Office\nJohn\nDick\nRobson\nSimpson\nTom\nKauper\nJim\nBill\nLynn\nSeidman\nJim\nPaul\nThe\nEd\nBill\nCannon\nMacAvoy\nPresident\nSchmults\nSimon\nOpening Statement of the President\nGood afternoon. It is a pleasure to have you here to follow up on\nour meeting last July. This continuing dialogue on regulatory reform\nis important to all of us in government - and to the American people.\nLet me thank you all for the progress reports that I received.\nThey were useful to me and my staff in reviewing the successes\nyou are having in improving your regulatory activities.\nToday, I am looking forward to discussing our common problems\nand our joint duty to see that we have a responsive and efficient\nregulatory system. Specifically, let's take a hard look at how\nregulations affect the consumer, small businessmen, and the\ntaxpayer.\nConsumers are concerned with the costs of regulation. They feel\na frustration both with the process and the results. Many are\nconvinced that the costs are not justified and that the public interest\nis not being protected.\nSmall businessmen are tired of the overwhelming number of\nregulations that are insensitive to small business needs and that\nmake it increasingly difficult for small businessmen to survive.\n-2-\nThe regulatory problems of small businessmen come up often in my\ndiscussions with our citizens. I hear about the large number of\ngovernment forms they have to fill out every year. I hear about new\nproducts and services that small businessmen want to offer but can't\nbecause of unnecessarily restrictive regulations. I hear of enforcement\nactivities that defy common sense.\nFinally, taxpayers are questioning the practice of adding more money\nand more people to government bureaucracies to solve problems.\nThe taxpayers of this Nation are concerned about big government.\nThey question having to pay for a government that doesn't recognize\nchange, that doesn't think of new, less costly ways to achieve public\ngoals. They expect their government leaders to be diligent in looking\nfor better, more efficient ways to conduct the affairs of government.\nAll of us at this meeting have a special responsibility for guarding\nthe public interest. It is our obligation to provide the public a\nreasonable, fair, speedy and understandable regulatory system.\nYou have made progress toward this goal in the past few months and\nyour efforts are encouraging. But we need to continue our work.\n-3- -\nWhen I met with a bipartisan group of congressional representatives\nlast June, there was broad agreement on four areas of common\nconcern:\n- We must examine our regulatory practices in light of\ntoday's economic needs;\n- Competition should be relied upon whenever possible;\n- Many regulations cost the country more than they\nreturn in benefits; and\n- The regulatory process should serve the general public --\nnot simply benefit special interests.\nClearly, our job is to show measurable results in addressing these\nconcerns. Congress has indicated that it is looking for results.\nMore and more, Congress is considering legislation to address\nregulatory problems.\nThe reform of government regulations is a responsibility shared\nby the Executive branch, the Congress, and the independent commissions.\nOur joint effort to eliminate outdated, inefficient regulations and to\nimprove essential regulatory functions is the best way we can fulfill\nour responsibility to the public.\n-4-\nAs we discuss regulatory lag, we need to make sure we address\nthe reordering of priorities and the new approaches that are being\ntaken to cope with backlogs and delays. When we talk about consumer\nrepresentation, we must go beyond just giving the consumer a chance\nto participate in proceedings. We must consider how well agency\nrules and regulations are communicated to the general public and\nhow well consumers' interests are balanced against other points of\nview.\nWhen we talk about cost/benefit analysis, let's identify how well\nit is being applied to agency decisions as well as to internal agency\nmanagement concerns. And when we turn to the importance of\nincreasing competition, let's ask whether we are concentrating on\nmarginal changes or whether we are addressing the fundamental\nquestion of whether or not the regulation is still necessary.\nNow I would like to turn the discussion over to Ed and Paul.\nEd, would you like to begin?\nClosing Statement of the President\nThank you. This has been a very useful meeting for all of us.\nTo keep the momentum going, let me ask you to submit to me by\nSeptember 15 another progress report on your efforts to achieve\nimprovements in the four areas of concern - - reducing delays,\nincreasing consumer representation, improving the use of economic\nanalysis, and increasing competition. There is still much work to\nbe done. I'm sure that the American people will be interested in\nour continuing progress in each of these areas.\nI have three requests for you to keep in mind as you prepare your\nnext report. First, special consideration should be given to how\nwe can make our progress -- as well as our regulations -- more\nunderstandable. For example, when you report on how you are\neliminating or improving your regulatory functions, I would like to\nsee a specific statement on how the change will affect consumers,\nsmall businessmen and taxpayers. The statement should be a\nstatement of quantified benefits, not just a general assertion. Our\nregulatory system has been established in the name of the public\ninterest. Certainly the general public should be given a clear\nexplanation and justification of what we are doing and why.\n-2-\nSecond, the report should list and discuss priorities for agency\nreforms. Along with the priorities should be recommendations\non where regulatory objectives can be achieved in a less costly,\nless time-consuming, more efficient manner. If we are going to\nshow results to the American people, we need to have a better idea\nof our priorities and how we will accomplish them. One of your\nfirst priorities should be consideration of wh ere there is workable\ncompetition or where competition could increase if outdated\nregulations were eliminated. It is our responsibility to see that\nour regulatory policies and practices do not perpetuate unnecessary\nrestrictions on today's economy.\nThird, I ask all to concentrate, along with the other Executive\nbranch agencies, on achieving a 10 percent reduction in the number\nof forms that federal agencies require. I was overwhelmed when\nI learned the total number of federal forms we expect the American\npeople to fill out. It has been said that our continued requests for\ninformation cost individuals and businesses billions of dollars in\ntime and expense every year. The cost of federal paperwork can\nno longer be considered an \"incidental\" cost. As a matter of fact,\nmany small businessmen have pointed out that it just isn't worth it\n- 3\nfor them to hire new people or to even stay in business when so\nmuch time and effort must be directed to filling out forms instead\nof selling products or services.\nThe Commission on Federal Paperwork is currently looking into\nlong term approaches for reducing the problems and costs of\npaperwork. I recently directed the Executive branch agencies to\nachieve a 10 percent reduction in the number of forms by July.\nIn your September 15th report on your administrative reforms,\nI would hope that you could also report on your contributions to\nachieving a reduction in reporting requirements at least equal to\nthat of the Executive branch agencies.\nLet me thank all of you for your efforts. I look forward to your\nnext reports. These should be very interesting for the American\npublic and helpful to each of you who are dealing with similar problems.\nThrough these reports, I hope that we can continue to exchange ideas\non how to deal with our common regulatory reform challenges.\nYour achievements and future plans that we have discussed this\nafternoon convince me that we are all working toward the goal of\nmaking the Federal Government as responsive and efficient as\nhumanly possible.\nTHE WHITE HOUSE\nWASHINGTON\nApril 8, 1976\nMEMORANDUM TO THE PRESIDENT\nFROM:\nEd Schmults and Paul W. MacAvoy\nSUBJECT:\nTask Force to Improve Regulation\nI. Background\nIn your meeting with the Domestic Council Review Group\non Regulatory Reform, you called for speeding up the pace\nand broadening the scope of reform efforts. Expecting that\nthe Executive Branch regulatory agencies would not reform\nthemselves, and that it would take strong outside pressure\nto reduce the costs that these agencies impose on the\neconomy, we have tried to develop the most effective way of\norganizing both inside and outside forces for reform.\nII. Proposed Task Force on Regulatory Efficiency\nWe propose that you establish an interagency task force\non regulation directed to improving the operating efficiency\nof the agencies. The task force would have both a short-term\nand longer-term charter.\nThe short-term charter would be to focus on two to three\nspecific agencies that now appear to impose costs on the\nsociety that are substantially larger than their benefits.\nThe task force would seek to identify particularly costly and\nineffective regulations, or particularly onerous agency\npractices and procedures which could be changed quickly and\neffectively. At the same time the task force would lay out an\nagenda of major policy questions facing the agency, collect\ninformation currently available which addressed these questions\nand stimulate the gathering of any new information required.\nFORD\n-2-\nThis would lay the foundation for broader, future improvements\nin Executive Branch regulatory activities.\nWe conceive that this interagency task force will simplify\nprocedures, reduce delays, remove redundant regulations as\ndemonstrations to other agencies on what can be done. But the\nTask Force efforts will not stop there. Rather, they will\nprovide a basis for sustained efforts to improve the\nperformances of regulatory agencies at both broad and detailed\nlevels.\nA.\nOrganization of the Task Force\nThe task force would be chaired by Paul W. MacAvoy of\nthe Council of Economic Advisers. It would report to the\nEconomic Policy Board. Sub-Cabinet members of each of the\nmajor Departments or agencies involved would be members of\nthe task force.\nIn addition to the task force, there would be working\ngroups formed to develop proposals for the three specific\nagencies chosen for reform. The working groups would\ninclude representatives of the affected organizations.\nSpecific working groups would be formed as a new organization\ncame up for review, and dissolved as the work was completed.\nFinally, both the task force and the working groups\nwould be staffed by combinations of insiders and outsiders.\nFor example, academic consultants would be hired to complete\nspecific fact finding assignments. Staff would be drawn\nfrom affected Cabinet departments, and also from OMB, CEA,\nJustice, and COWPS. The staff drawn from inside the target\nagencies would insure that the agencies were committed to\nthe objectives of reform.\nB.\nAnticipated Benefits\nIf this task force is established, you could expect the\nfollowing results. First, the mere establishment of the\ngroup would be further evidence of your commitment to con-\ntrolling the size and increasing the effectiveness of the\nFederal Government. Second, by next September, it is\nreasonable to expect important changes would take place in\nthe regulations and procedures of the specific target\norganizations. This will produce immediate benefits and\ngive impetus to subsequent broader policy efforts.\n-3-\nThird, by next January it should be possible to\nestablish an agenda of major policy actions in those\ntargeted organizations. This agenda would provide an\naction program comparable to that developed this year\nfor the reform of the independent regulatory agencies.\nIII. Target Agencies\nThe choice of those agencies to be reformed is the\nmost critical stop in the whole reform process. If an\nagency is chosen prematurely, reform proposals may prove\nto be impossible to put into effect within a year or may\nprove to have little impact on producers or consumers.\nInvestigations within the last month have pointed to\nfour likely targets:\n(1) OSHA. The OSHA manadatory physical standards\nfor work conditions are extremely detailed,\ncostly to meet, and have little or no effect\non accident rates. A number of regional\nhearings would be held to determine the most\ncostly and least effective standards. The\nreform program would seek to eliminate these\nparticular standards.\n(2) The Export Control Board in the Department of\nCommerce issues export licenses for sales of\nmajor products to Eastern European and Sino-\nSoviet countries. The process is unduly\nprolonged and has an adverse impact on jobs\nin the United States. There are complicating\nnational security issues however, SO that the\nreform effort has to be directed to developing a\nquicker and more effective licensing procedure.\n(3) NHTSA in Transportation is responsible for on-\ngoing programs in highway safety, as well as\nfor major decisions on truck brakes and the\nair bag. This agency does not adequately\nconsider the economy-wide effects of their\nmore important decisions. An attempt should\nbe made to develop procedures for doing benefit-\ncost analysis and using the analysis in decision-\nmaking.\n-4- -\n(4) FEA, although required by specific congressional\nmandate to develop comprehensive oil price\ncontrols, has managed to produce extremely\ncomplicated and cumbersome regulatory procedures.\nWhile decontrolling refined products over the next\nfew months, FEA could make extraordinary efforts\nto simplify its regulations and to educate the\npublic on the benefits from reduced regulation.\nIV. Necessary Actions\nAn essential component in initiating this effort is\nyour personal commitment. A commitment must be communicated\nto Cabinet officers and offices within the Executive Office\nof the President. A memorandum to appropriate officials and\na press release are attached.\nAttachments\nsee Task force\nTHE WHITE HOUSE\nfolder\nWASHINGTON\nApril 8, 1976\nMEMORANDUM TO THE PRESIDENT\nFROM:\nEd Schmults and Paul W. MacAvoy\nSUBJECT:\nTask Force to Improve Regulation\nI. Background\nIn your meeting with the Domestic Council Review Group\non Regulatory Reform, you called for speeding up the pace\nand broadening the scope of reform efforts. Expecting that\nthe Executive Branch regulatory agencies would not reform\nthemselves, and that it would take strong outside pressure\nto reduce the costs that these agencies impose on the\neconomy, we have tried to develop the most effective way of\norganizing both inside and outside forces for reform.\nII. Proposed Task Force on Regulatory Efficiency\nWe propose that you establish an interagency task force\non regulation directed to improving the operating efficiency\nof the agencies. The task force would have both a short-term\nand longer-term charter.\nThe short-term charter would be to focus on two to three\nspecific agencies that now appear to impose costs on the\nsociety that are substantially larger than their benefits.\nThe task force would seek to identify particularly costly and\nineffective regulations, or particularly onerous agency\npractices and procedures which could be changed quickly and\neffectively. At the same time the task force would lay out an\nagenda of major policy questions facing the agency, collect\ninformation currently available which addressed these questions\nand stimulate the gathering of any new information required.\nFORD\nReg Reform\nFOR IMMEDIATE RELEASE\nAPRIL 8, 1976\nOFFICE OF THE WHITE HOUSE PRESS SECRETARY\nTHE WHITE HOUSE\nEXCHANGE OF REMARKS\nBETWEEN THE PRESIDENT\nAND\nMEMBERS OF. THE REGULATORY AGENCIES\nAND ADMINISTRATION OFFICIALS\nTHE CABINET ROOM\n2:08 P.M. EST\nTHE PRESIDENT: First, let me welcome you all to\nour second session. I remember very vividly the session\nwe had before. I felt it was very constructive. I subse-\nquently had the opportunity to talk to Members of Congress,\non both sides of the aisle, and at both ends of the Capitol.\nI think most of you recognize they have a very\ngreat interest in what we are trying to do. As a matter of\nfact, I think some of their efforts are probably as hard\nhitting as I hope ours are in trying to satisfy the industries\nand the segments of our society that all of you have a great\nresponsibility and are deeply involved in.\nI think in this session we have today my remarks\nwill be kept to a minimum because I am more interested in\nhearing about what you have done and what your plans for the\nfuture are. I think we have to recognize that there are\ncertain areas that more or less cut across each of your\nagencies; for example, the consumer, the small businessman\nand, of course, the taxpayers.\nThe latter affects not only all of you in a\npersonal way, but as individuals who have a responsibility\nto handle a great deal of personnel, some more than others,\nand you all have a responsibility affecting our economy,\nand that affects our taxpayers.\nWe do have some mutual problems, both in the\nExecutive Branch per se and also in the regulatory agencies.\nAbout a year ago I asked how many forms are required of\nbusiness generally or of citizens generally. I think the\nfigure was around 5,200, which seems awfully high, but we had\nit verified and I suggested to Jim that we ought to require\nthat every agency of the Executive Branch of the Government,\nas well as others, do something affirmatively to reduce that\nonerous burden on individuals and on our society. The target\nis 10 percent by July 1.\nJim, I understand some are doing better than others.\nMORE\nFORD\nPage 2\nMR. LYNN: Yes, and we have had a complicating\nfactor. As we dug into it, we found there are some forms\nthat are never reported. We find also some departments and\nagencies show progress toward the 10 percent cut. They\nwork from the originally reported figure because they count\nones they didn't know about before from the old 10 percent\nnumber. It is uneven, that is the best way to characterize\nit.\nTHE PRESIDENT: We expect everybody -- and we will\ninclude the White House in that -- to get that 10 percent\nfigure down. Ed Schmults and Paul MacAvoy have been handling\nthis responsibility for me, and I would like at this point,\nEd, if you would kick it off, and I will mainly listen and\nmaybe ask some questions.\nMR. SCHMULTS: Before we begin our discussion, I\nwould like to make a few comments on the progress reports\nyou all submitted at the end of the year. Reform of our\nregulatory system is a long-term effort, and we would like\nto see what you have accomplished and what you are currently\ntrying to achieve.\nThere are some points that were not fully dis-\ncussed in the reports, and I hope we can talk about them\nthis afternoon as we discuss our future efforts. We would\nlike to direct our discussion to what has been done and what\nneeds to be done.\nThe reduction of agency backlogs and delays seems\nto be the highest priority for everyone here. There have\nbeen some marked achievements in this area, and it is\ninteresting to see the various approaches you are taking to\nsolve your backlog problems.\nSeveral agencies are also taking a number of\nimportant steps to increase consumer representation in\ntheir proceedings. In some cases, however, the consumer\nseems to be equated with the customer who benefits most\ndirectly from a regulated service.\nIt is the American people who ultimately pay the\ncost of regulation, and all of them must be represented,\ntoo.\nIn general, there is less progress in improving\nthe quality of economic analysis. Some of the reports\nshow understanding of the importance of increasing and\nexpanding the use of economic analysis in agency policy-\nmaking. Most agencies seem to be more limited in how they\nare using economic analyses.\nMORE\nPage 3\nFinally, most of the reports were far from\nspecific in what was needed to increase our reliance on\ncompetition instead of regulation. It is not enough to\ndetermine how we are doing things without questioning why.\nI hope we will highlight our efforts today on future actions\nin this area. On the whole the reports are encouraging and\nresponsive.\nI would like you today to report on what you\nconsider your most considerable reform effort.\nI would like to call on each of the chairmen to\ndiscuss each agency's efforts. In order to have time to\nconsider all the agencies, I would ask each agency about\nyour most significant reform success and that your report\nbe kept to three or four minutes SO we have time for follow-\nup questions.\nYou will recall we advised each of you we are\nmaking a transcript of the meeting and plan to make it\npublic.\nLet's begin with Dick Wiley of the FCC.\nMR. WILEY: On behalf of the Federal Communications\nCommission, I am pleased to discuss once again the important\nsubject of regulatory reform. At our last meeting on July 10,\nMr. President, you outlined four areas in which you hoped to\nsee some improvements in our service to the public. Let me\ncomment briefly on the Commission's recent efforts in each\nof these areas.\nNumber one, elimination of antiquated regulations\nor those which stifle competition. For several years now,\nas our written reports indicate, we have undertaken a major\nderegulatory effort designed to eliminate needless, outmoded\nand overly burdensome regulation. We have, for example,\nmodified or deleted over 400 rules in broadcasting and have\nmade 25 major reforms to our cable television policies.\nWe have made a special effort to reduce regulation\nof the small businessman, the person on whom the burden of\nGovernment paperwork falls most heavily. This is perhaps\nbest exemplified by our new short-form radio renewal\napplication, adopted just last month.\nThe Commission has also placed considerable emphasis\non rule changes in the common carrier field which have the\neffect of introducing competition in place of monopoly\nregulation. This has been true in domestic private line\nservices, terminal equipment, land mobile radio and inter-\nnational communications.\nMORE\nPage 4\nIn each of these areas, the Commission's actions\nhave provided an opportunity for our free enterprise system\nto function, and the result has been to afford the individual\nconsumer and the businessman a greater variety of modern\ncommunications options and alternatives and at reduced\ncosts.\nThree weeks ago, for example -- and I think this\nwas our most significant effort -- the FCC greatly expanded\nthe opportunities for competition in the telephone equipment\nmarket.\nNumber two, procedural delay. In July of 1974 we\ncreated a task force to undertake a comprehensive re-examin-\nation of the Commission's adjudicative rules in order to\neliminate unwarranted delays. Last month, the FCC announced\na major overhaul of our historically cumbersome and time-\nconsuming hearing procedures.\nWithout going into detail, let me simply say that\nthese innovations should result in decision-making which is\nfaster, more efficient, and I believe more responsive to the\npublic interest. The problem of agency delay has also\nbeen addressed in the context of an extensive backlog\nreduction program.\nNumber three, expanded public participation. In\nthe last two years, the FCC has substantially increased\nthe opportunities for citizens and public interest groups\nto express their views to the Commission and to contribute\nto our decision-making.\nSpecifically, we have instituted a regional meeting\nprogram in which the chairman, other commissioners and key\nstaff personnel have met face-to-face with the public in\nsuch major urban areas at Atlanta, Chicago, Boston, Denver,\nLos Angeles, San Francisco and Washington, D.C. These\nsessions are supplemented by monthly full commission\nmeetings which are open to groups seeking to present their\nviews to us.\nWe recently have instituted a new weekly publi-\ncation -- distributed to public interest and consumer\norganizations -- which summarizes FCC decisions and invites\ncomments on our rule-makings.\nJust last month, in a significant action, we\nannounced the opening of a Consumer Assistance Office whose\nfunction is to provide personalized aid to the average\ncitizen in finding his way through the bureaucratic\nmaze.\nMORE\nPage 5\nNumber four, economic impact analysis of\nregulations. A basic principle of regulatory reform is to\ninsure that necessary regulation be as effective and efficient\nas possible, both in terms of the resources consumed by\nregulatory agencies and the economic consequences which\nthese rules may have on the public.\nThe FCC is now implementing a Program review\nanalysis to give the Commission detailed information on\nthe resource impact of major policy decisions and to review\nexisting programs and operations from a cost-benefit\nperspective. The ultimate result of this project should be\nsignificant budgetary savings, a better recognition of the\nCommission's regulatory mission and a greater understanding\nof the specific economic implications of our regulations.\nFive, remaining problem areas. Despite our efforts,\nwe cannot suggest, Mr. President, that the FCC has overcome\nall obstacles to optimum efficiency. One significant\nproblem that has received a good deal of recent notoriety\nis Citizens Band radio. The principal difficulty here is\nthe veritable explosion of consumer demand in the last\nyear.\nTHE PRESIDENT: How did Mrs. Ford get that?\nMR. WILEY: We are now instituting, I might say,\nan operation where every citizen can get a temporary\npermit, so it won't only be the First Lady.\nIn early 1975 we were receiving about 50,000\napplications a month. This year, the figure is over 550,000\nper month. Associated with such a phenomenal rise are the\nproblems of application backlogs, unlicensed and illegal\noperation, interference to broadcast and other home enter-\ntainment services and spectrum overcrowding.\nWe have moved to deal with this situation by\nsimplifying our rules and forms, automating our licensing\nprogram, investigating alternative licensing procedures\nand considering additional spectrum space for the service.\nWe don't have all the answers to CB as yet, but if\nmembers of the public enjoy using this service -- and\napparently they do including, I note, the First Lady, better\nknown to her fellow CB'ers as KUY-9532, and I might say\nother members can also use that (Laughter), we will be\nlistening for you -- the Commission must find new ways to\npermit them to do so without impairing other communications\nservices.\nIn conclusion, Mr. President, let me reiterate the\nFCC's full and vigorous commitment to deregulation and to\noverall reform of our service to the American public. We\nlook forward to continuing to work with you and your staff\nin this very significant undertaking.\nMORE\nPage 6\nTHE PRESIDENT: Thank you very much.\nMR. SCHMULTS: Dick, does your experience with\nthe citizens band problem suggest you might explore, in\naddition to the other steps you are taking, widening the\nexemption area so you wouldn't have to go through a\nlicensing procedure process?\nMR. WILEY: We have looked at that. The greatest\nproblem is the spectrum is not discreet. If you have\ninterference in one portion of the spectrum, inevitably\nyou will have interference in other portions. We believe\nthe licensing procedure is the single greatest tool for\nenforcement.\nWhat we are doing, as I suggested to the President,\nthe problem has been the people get the equipment and then\nhave to wait six weeks to get their license. Temptation\ncomes in and they start to utilize the equipment. We are\nsetting up a temporary permit authorization. We will at\nthat time have an informative, simple, easy to read pamphlet\nwhich tells the very basic regulations, what is necessary\nin order that all can enjoy this service. If it is not\nregulated, there will be chaos because of the closeness of\nthe CB bands to broadcast bands and there will be\ninterference.\nWe might be able to go to a total deregulation\nbut I think that is in the future.\nMR. STAFFORD: Could I make a cross-reference?\nMR. SCHMULTS: Yes, surely.\nMR. STAFFORD: I don't know whether it was before\nDick or not, but the FCC asked us to get involved because\nthe truckers were using this in the strike two years ago.\nIt really had us all tied up and they were, as you may\nrecall, really using them to benefit, tie up all the\ncommerce that was trying to move. So the FCC asked us to\nget involved and try to hold them down because they didn't\nhave authority in that area.\nSo we put out an order then in effect threatening\nthem a little bit, but that was about as much as we could\ndo. But it gave truck management a lot of authority to tear\nthem out of trucks.\nNow we find that a lot of the truckers -- a lot\nof the management now like the idea of having them in\nthere because they are cutting down on their loss and\ndamages they are having because they immediately put out\nthe CB report the second they have lost a truck loaded\nwith something very expensive.\nMORE\nPage 7\nOne of the largest truckers in the Southeast told\nme they were now cutting their losses better than 40 percent.\nThey don't care about anything except getting their truck\nback with their load. So every taxi driver, everybody\nimmediately knows he is going to get $1,000, $5,000 if he\nis the one that turns it in and they immediately move in\non them.\nThey have been catching many of these trucks.\nThey don't say we will not pay you until you can put\nsomebody behind bars, we will pay you just to get our\ntruck back.\nMR. WILEY: The police are even now using CB.\nIt is the one spectrum where every man can use the radio.\nI think we have to find a way to facilitate this.\nMR. STAFFORD: I would be concerned if you tried\nto deregulate that too much.\nMR. MacAVOY: One of the fastest areas in new\ntechnology is the communications industry and it appears to\nus we are on the edge of an explosion in communication from\nthe use of satellite technology.\nIs the commission prepared to deal with the\nproblems of entry permits, and rate setting as this new\ntechnology develops?\nMR. WILEY: I think SO. We have seen this coming\nfor some time. I think I would tend to agree with you\nsatellites portend a tremendous revolution in communication\nservices. We have adopted, I think, a modified open entry\npolicy because we do believe in competition in this area.\nA number of companies are making great investments to use\nbirds and to develop this new service.\nWe think that we have prepared carefully for this,\nstarting back in 1972. We think we are ready for the\nrevolution that will come.\nMR. MacAVOY: The interest is by private companies\nand telecommunications companies. Are they able to compete\non an equal basis?\nMR. WILEY: I think they will be, yes. That has\nbeen the basic concept we have had. The Commission did\nmake a decision to place a limitation on the American\nTelephone and Telegraph Company in this area. I must say\nthe chairman and I dissented. That is the best way to get\nthis new system developed and in the most productive way\npossible.\nMORE\nFORD\nPage 8\nMR. SCHMULTS: Thank you.\nCould we hear from Mr. Bagley of the Commodity\nFutures Trading Commission?\nMR. BAGLEY: The first thing we will try to do\nis change the name of the Act. You don't know what\nthe people call the Commodities Futures Trading Commission.\nMr. President, gentlemen, let me take a little\ndifferent tack rather than trying to regale you with what\nwe have done in our 11 months of tenure. I think it makes\na little more sense from my standpoint in trying to help\nyou to look ahead at what all of us should be doing from\nthe perspective of somebody who just came to town.\nI don't want to burden you with a restating of\nour unit, but the only point is we do not have regulatory\ndelay; by the fact of the calendar we don't. We don't\nhave regulatory conflicts and conquests. We don't have\nregulatory malaise. We haven't been around long enough to\nsuffer hardening of the categories. So it wouldn't be\nfruitful for me to sit here and try to tell you we can\nmake our decisions in three weeks -- big deal. But the\nfact is we do.\nI think it is more fruitful to try to broaden\nour perspective and talk of the broader problems and,\nhopefully, solutions that the new boy in town sees when he\nbecomes all of a sudden chairman of a regulatory commission,\nhaving served his former life as a legislator and, WOW, it\nis different. (Laughter)\nI miss the accountability and commonality of a\nconstituency. Commonality, meaning there is a thread that\nmakes participatory democracy work, but that thread isn't\nthere just because the President appointed five different\npeople. That doesn't make for constituent democracy.\nSo the biggest problem that you asked about that\nI foresee is how to first of all formulate the concept of\nand then build a broader constituency. That goes over the\nwhole gamut, the whole spectrum. It is sort of obvious\nbut, believe it or not, in our first discussions in this\nnew commission, there was disagreement on whether we should\ntry to build a constituency. Having agreed that that is some-\nthing we darned well better do, then you try to look in\nthe direction of where you want to go. It is the luck\nof the draw as to where you end up -- five guys, all good\npeople -- but it is the luck of the draw whether three guys\ngo in that direction and two in the other because there is\nno inherent constituency.\nMORE\nPage 9\nSo what do you do? You try to create. In my\nhumble opinion, this, I would say, is your major\nsuccessful effort at regulatory reform, an atmosphere of\nopenness. I am talking of open meetings.\nThe Consumer Product Safety Commission and recently\nthe Federal Trade Commission joined us by resolution in\nour open meetings.\nThere are three or four bills in Congress and\nmany are nightmares. They create a bureaucracy of openness\nbut there are too many rules of how you do it.\nMr. President, I think perhaps you are endorsing\nthe concept, and the States, cities and counties in the\nlast few years -- California since 1973. I found out that\nthe City Council of Grand Rapids passed a resolution that\nthey were going to have open meetings. The concept is here.\nIt also helps to build a constituency. That is\nthe point.\nAnother way to build a constituency is to look\nat the so-called sunset laws. Colorado just passed one.\nThere are three or four on the Hill. Again, there are\nproblems with those bills because some of them contemplate\nimmediate self-destruct of everybody here. You can't do\nit that way. But, again, for the purpose of accountability\nand constituency building, if you had a phase-in system\nwhere one entity, one agency every year over a period of\n15 years with recurrent necessity to reauthorize, not just\nbudget, reauthorize the very existence -- nobody is going\nto get rid of all the agencies, but at least there will\nbe an occasion for rewriting of the law. That makes\nCongress more mindful of their obligation and creates in\nthem the concept that they are the constituency.\nThe third area, we will talk of data reform, getting\nrid of the forms. All well and good, we will be doing that\nWe find some have been around since 1922 when our\npredecessor agency was enabled, but in addition, not\njust for the sake of efficiency, but again for public\naccess, let's make those forms and that information something\nthat the public can get to, can have access to and thereby\nunderstand what we are doing. Let the public in. Let them\nparticipate and create that atmosphere of participation.\nLastly, and I mean this, if all of that doesn't\nwork -- and I have my doubts as to whether it will: I took\na quick look last night at the Ash report and their\nconclusion was in many instances the multi-member commission\nwithout a constituency, without built-in accountability\nhas problems.\nMORE\nPage 10\nI would very seriously recommend that your\npeople look at the idea again of advocating a little surgery\nrather than cosmetics to really shake the regulatory tree.\nTHE PRESIDENT: Did you find when you and your\nassociates went in and took over that you were surprised,\npleased, or felt otherwise concerning the operation of\na commodity market?\nMR. BAGLEY: First, I was amazed that the industry\nexisted. I was neutral. As far as the markets, they had\nbeen doing well, so there wasn't any major surgery on our\npart to undertake. We basically had to let them know we\nwere not going to \"Mau-Mau\" them out of existence; that we\nweren't going to upset their marketplace.\nThere are an awful lot of things, simply because\nof our new jurisdiction, that were not undertaken. That\ndoesn't mean overregulation; it means from our standpoint\nmaking the market a better place and, therefore, helping\nit grow as it becomes more credible. That is sort of our\nregulatory philosophy.\nFrom the standpoint of the overall picture, I\nreally believe if you don't have this concept of a constituency\nand accountability built in, then you will get captured\nsooner or later. Therefore, I would seriously consider\ntaking a longer look at the Ash report and converting some\nof these agency heads to become accountable to the White\nHouse and accountable to the Congress.\nI have one further thought, a regret which I have\nto express. I am sorry that my regulatory responsibilities\nprevent me from campaigning -- that regulatory agencies don't\nallow me to get out and do what I would like to do.\nMR. SCHMULTS: Thank you. You have given us all\nsome good thoughts to consider.\nBill Anders of the Nuclear Regulatory Commission,\ncould we hear from you?\nMR. ANDERS: Mr. President, the Nuclear Regulatory\nCommission's primary responsibility is to assure effective\npublic health and safety in the use of nuclear power. We\ndiscussed this rule here about two weeks ago and I want to\nassure you that responsibility is being met.\nIn addition, a key personal motivation of mine was\nto make the regulatory process not only effective but also\nefficient. By an efficient process, I mean one not fraught\nwith delay, but one that is consistent and predictable and\nwhich facilitates industry planning.\nMORE\nPage 11\nMy colleagues have given me their full support\nand share my belief that procedural regulatory improvement\nand the development of a realistic regulatory ethic is\ncompletely compatible with our health and safety\nresponsibilities.\nI will hit some of the high points of what we\nhave been doing. We have been eliminating regulations that\nwere unsuccessful or unproductive and making cost impact\nvalue assessments. The Commission revised its requirements\nfor control of radioactive effluents from nuclear power\nplants when we determined the cost of additional equipment\ndid not result in significant public health benefits.\nFurthermore, we revised our original implementation\nplan for these new requirements when it was itself shown\nnot to be cost-effective. Such impact value review is\nnow a basic tool used in evaluating proposed regulatory\nactions by our Senior Regulatory Requirements Review Committee.\nWe have also taken a number of specific actions\ndesigned to increase regulatory efficiency, particularly\nin reporting requirements. These have been refined and\nreduced substantially to improve the focus on safety.\nWe have arrived at a more realistic estimate of\nthe frequency that information is needed for regulatory\npurposes. First year operating reports have been eliminated,\nand subsequent reports are now annual instead of semi-annual.\nAs a result, the volume of paperwork provided from\neach reactor licensee has been reduced by several hundred\npages a year without adverse impact on safety.\nWe have also placed considerable priority during\nthe past year on alleviating prime difficulty for the nuclear\nindustry and the affected public; that is, the difficulty\nin planning in the face of uncertain governmental regulatory\npolicy.\nWe are continuing our efforts not only toward\neliminating unnecessary time in reaching regulatory\ndecisions but also toward stability and predictability in\nthe decision-making process. It is in this latter area\nof stability and predictability that I believe greatest\npotential payoff to the consumer exists.\nAs an example, we published a complete description\nof how the NRC staff is going about its safety review of\nnuclear power plant applications. These so-called \"standard\nreview plans\" are enabling industry to plan with greater\ncertainty, and have resulted in a more disciplined and\npredictable review.\nMORE\nPage 12\nFurthermore, when industry knows what is and what\nwill be expected of them, they can plan and utilize their\nresources more efficiently, thus providing the consumer more\ncost-effective energy and a safer product.\nI believe we established a number of organizational\nstructures and probably, more importantly, enthusiastic\nstaff reports which will assure that the concepts of both\nefficiency and effectiveness are built into the ways\nwe carry out our every day business. These can be expected\nto have significant benefits to both the taxpayer and\nconsumer. Much of this benefit will not become directly\nevident as it will consist simply in avoiding unnecessary\nbureaucratic growth and unjustified requirements.\nAdditionally, Mr. President, we are strongly\nsupporting legislation which your Administration has\nproposed on the Hill and which we are in favor of for new\nlicensing procedures for nuclear power plants, particularly\nrelated to nuclear safety and regulatory efficiency.\nAfter I leave, Marc Rowden, our Chairman-designate,\nis particularly interested in this and will continue the\nefforts that we have already begun.\nMr. President, Mr. Chairman, that is about all I\nhave to say.\nTHE PRESIDENT: You mentioned the meeting we had\nhere several weeks ago where I got the full briefing on\nsafety, safeguards and other matters involving nuclear\npower, primarily because of a situation involving California.\nI noticed the other day in Michigan -- my home State --\npetitions are being circulated to get a referendum on the\nballot in Michigan. I assume many of the same provisions\nare included in the California ballot. They are striving\nto get it on by the election this fall but apparently they\nare not getting as enthusiastic responses as they did in\nCalifornia. But if not, they will certainly aim for 1978.\nSo this problem in California is obviously going to be\na problem in other States.\nMR. ANDERS: California will be the bellwether\nof this whole affair and is the one we are watching.\nThese folks who have a negative view on nuclear\npower- the regulatory hearing process is one amenable to\nbeing used for delay; in fact, that delay which still exists\nin the process is mostly attributed right to that segment.\nThere is not much we can do outside the hearing process to\nmake it much better.\nThe California situation, which comes up on June\n8, I believe, is one that is particularly insidious in\nthat proposition 15 is written in such a way that if you\ndon't understand it, you will vote for it and support it\nautomatically.\nMORE\nPage 13\nMR. SCHMULTS: Thank you.\nNow we will hear from the Securities and Exchange\nCommission. Rod is one that has gone from the frying pan\nto the fire in terms of regulation.\nMR. HILLS: Our efforts have been to institutionalize\nour procedures. Our new Director of Economic and Policy\nResearch, which is a brand-new office for us now headed\nby a prominent economist, is determining whether a proposed\nregulation is worthwhile. We are monitoring to see whether\nour regulatory objectives are met and, if not, those\nregulations will self-destruct.\nIn February we began an extensive study of the\ndisclosure policies which have been developed by the SEC\nover 41 years. We have a prominent advisory committee which\nwill oversee what is a major staff effort which we believe\nwill result in not only a new disclosure policy but a very\nsubstantial savings in money each year to the public.\nThis month we have approved a major additional\neffort to change and modify all of our forms and the under-\nlying regulations. Jim will know better than I what 10-K,\n10-Q and 8-K means. Our change in just form 8-K will result\nin a 44 percent reduction in the number of 8-Ks filed. The\nunderlying regulations, it will mean 75 percent of all the\nadvertising expenses in an adversary proceeding will be\neliminated. The savings annually will be in the millions\nof dollars from that one point.\nIn March, we began an examination into all the\nregulations and laws pertaining to money management and are\nseeking an alternative to money management. We have a new\ndivision director, all new associate directors and a new\nchief counsel. In our judgment, within a short period of\ntime our management of money management will be entirely\nnew.\nLast month we appointed a Director of Small\nBusiness Policy to increase the ability of small businesses\nto raise capital, an effort we think is quite promising,\nan effort supported by the entire securities industry.\nFour months ago we adopted the so-called focus\nreporting system for local dealers. This reduces the paperwork\ndramatically because it means there is now a single form to\nbe filed with the Commission for all self-regulated industries\nand regulatory agencies of 48 States. It reduces reporting\nby 98 percent. One of the largest brokerage firms in\nthe country has told us the reduction of their audited\nfees - is 50 percent by this one change.\nMORE\nPage 14\nFour months ago we began an evaluation of\nproposed regulations or rules and, as a result, we have\nwithdrawn entirely 28 outstanding rules proposals.\nWe found opinions in our administrative proceedings\nwere taking two years to come down. We found the typical\nopinion took one year. Our attempt to reduce that typical\nopinion to 30 days is almost complete and it will shortly\nbe at 30 days. We found we could not track in any fashion\nthe delays in the thousands of filings made with our\ncommission every year.\nAs of last month, after a great deal of work and\na great deal of help from the OMB, we now have a computer\nrun that gives our managers a chance to identify every\nfiling within a week or two after it develops. The OMB\napproved our request with your support, sir, for money to\nconvert all our files to microfilm. That will further\nspeed our work, reduce our staff and save us a great deal\nof money, and will include a reduction of 35 people from our\npersonnel.\nWe eliminated fixed commissions, a practice\nstanding for 182 years. I think it is the only time that\na commission in the history of the Government in a rate\nmaking situation got out of it.\nWe believe that the efforts I have described will\nproduce comparable results and comparable endorsement in\nthe months ahead.\nTHE PRESIDENT: What has been the net result to\nthe consumer with the elimination of rate making?\nMR. HILLS: I think Ed made a good point a minute\nago. It has been difficult for us to find out who precisely\nour consumer is. To date, the consumer has benefitted\nonly to the extent he has been a participant in an\ninstitutional buyer. The cost of buying stocks through\nan institution is 5 percent. The same savings has not\nbeen passed on to individual buyers in precisely the same\nway because they don't yet have the effective muscle to\nhave the brokerage firm reduce their rate.\nWhat we have found out is that the industry has\nbeen pricing their commodity in the wrong fashion. Having\na fixed rate, they never tried to change it. It has now\nmoved to a fixed share cost instead of a percent. If the\nstock was $100, they were charging $5.\nBut now, industry is finding the cost is more\nrelated to the share. We are beginning to show the industry\nwhat it is costing them on a percent per share. That has\nshown the industry today in every category the cents per\nshare cost to consumer is even a tiny bit less than it is\nto the institutions. So I think there is no doubt amongst\nany of us that the cost to the consumer to buy a share of\nstock has been dramatically reduced.\nMORE\nPage 15\nI might say we are in mid-course of causing\ncompetitive market making in the securities industry.\nToday, on listed stocks, there is a monopoly position and\nwe have reduced that monopoly position in à dramatic way\nfor agency transactions.\nI think we have a growing consensus in the securities\nindustry and certainly have a regulatory intent to eliminate\nthis monopoly position. Once that is taken away and there\nis true competition in making the market stocks comparable,\nthere will be another dramatic reduction in cost of stocks\nto the consumer.\nMR. MacAVOY: One of the arguments that seems to\nbe the strongest or the most often presented in eliminating\ncontrol of the commission was the service to the small\npurchaser; the individual buying a few shares would be\neliminated, chaos would break out and, the result of the\nchaos is there would be no more service for small purchasers.\nHave you tracked the effect not on the prices\nbut the quality of services?\nMR. HILLS: Yes, we have, but the phenomena was\nnobody bothered to price the individual service, but everything\ncame together and they got their price. I know of no\nindividual losing service except many parts of the industry\nare having a hard time trying to figure out how to develop\ntheir services, but they are trying.\nThe issue of how to provide the right kind of\nservice to the right kind of buyer is very much in the\ndeveloping stage. We tried very hard to find who was going\nout of business. A lot of companies have, but there was\nby no means a dramatic exodus. We spent as much as four\nhours with people that went out of business trying to find\nout why.\nOne businessman came to us and said, frankly, they\nhadn't realized it but they were not in an economic\nbusiness, were not doing anything that made sense. We are\nnow trying to find out the type of investment advice people\nwant and charge them. Instead of making people pay for\nservices they didn't want, we are allowing people\ngradually to get the services they do want.\nTraditionally we have said people sell stocks but\ndon't buy them. The amount of stocks owned by institutions\nthat do their own research has grown dramatically. Many\nindividual stock purchases are now done by institutions,\nso by unbundling services we find people are developing\nservices and hiring people that can produce the kind of\nservices they want.\nI think I can say there has been no loss of essential\nservices anyplace. We have no consumer complaint they can't\nget the kind of services they want.\nMORE\nPage 16\nMR. SCHMULTS: Thank you.\nGeorge, could you tell us about your success at\nthe Interstate Commerce Commission in the area of regulatory\nreform?\nMR. STAFFORD: Mr. President, I am honored to have\nan opportunity to follow up our meeting of some months ago.\nBecause the ICC currently is engaged in implementing\nquite a few significant reforms initiated by our commission\nor mandated by our recent rail bill, the rail legislation\nrepresents a major rethinking and re-evaluation of the\nFederal controls over the transportation industry. The\neffect has been to redirect the efforts of the commission,\nreaffirm the needs for regulation in the public interest and\nto reinforce the importance of competition in our economic\nenvironment.\nLast July, you established four goals toward which\nall agencies should strive. The ICC fully supports those\nobjectives and they are and have been always foremost\nconsiderations in our policy deliberations.\nAt the end of last year, we apprised the Office\nof Management and Budget of our activities regarding the\nfour-point program. Our programs are progressing to the\npoint that we are seeing significant results regarding\nregulatory lag -- our backlog is down, and our output is up.\nConsumer assistance, though we feel it is very good now,\nwill improve by the creation of the Office of Public Counsel.\nWe are assessing even more carefully the impact\nof rate changes on consumers. We have added a whole new\nforce to watch for consumer problems in new rates. The\neconomic consequences of regulatory programs are receiving\ngreater attention today than ever before. We have\nreorganized our whole economic section with specialists\nin every area, including our continued efforts to make\nsure the American rural community receives adequate service,\nto allow the small businessman to remain competitive in the\nmarketplace, to provide the consumer with tools to participate\non more equal terms.\nWe are analyzing the causes and extent of empty\ntruck movements and conducting cost benefit surveys on the\neffects of regulation.\nIn the area of reduced regulation we have a number\nof activities underway, including a proceeding to remove\nmost rail rate regulation where effective competition exists.\nThe commission is proud of its responsiveness to your\nfour-point program.\nMORE\nFORD\nPage 17\nI have with me Commissioner O'Neal of our commission\nand he and I will be happy to answer any questions.\nTHE PRESIDENT: How are you doing on the gateway\nproblem?\nMR. STAFFORD: We are doing very well on that,\nMr. President. In fact, with the exception of a very few\ncases that we have been taken to court on and perhaps 15\nor 20 major problem cases, we have put out about 30,000\ncases in that and we are in the process now of trying to\nevaluate whether or not -- one of the agencies was trying\nto decide just how much fuel we were going to save as a\nresult of this and they told us it looked like we would save,\nas I recall, about 3 million gallons of fuel.\nTHE PRESIDENT: Three million a year?\nMR. STAFFORD: I believe that was every month,\nbut we are now going out to find out actually what is happening\non this. We are asking for their figures before and their\nfigures afterwards. I must admit, this has gone the other\nway on your other requirement to cut down on reports to\nbe filed, but this is a one-shot affair in order to try\nto just find out if it really was the kind of a saving,\nbecause, if you recall, if it was less than 20 percent\ncircuitry, we let them stop; if it was more than 20 percent\ncircuitry, we said you could not operate that way any\nlonger. We are making very good headway.\nTHE PRESIDENT: I will be very interested in that\nreport because, at the time of the oil embargo, it was\ncalled to my attention on several occasions how much in\nthe way of diesel fuel on a particular run they had to waste\nbecause of the problem.\nMR. STAFFORD: Then our favorite word, \"backhaul,\"\ngot involved at the same time on waste of transportation.\nOf course, backhaul is really a catch word that a lot of\npeople use and it just really means how much empty mileage\ndo these regulated carriers have.\nOur studies, there are two different studies\nwe have had and it comes up to about an overall 7 percent,\nbut we are spending a whole year -- this year, actually --\ngoing out to weigh stations all across the United States\nand we are checking very scientifically. We are working\nwith the Department of Transportation and with one or two\nof the other agencies to have something really worthwhile.\nSo we will know, and you will know, whether our figures have\nbeen right or not -- and we want to know.\nTHE PRESIDENT: How soon will you be actually\nutilizing the new rail revitalization and regulatory\nreform, if that is the right title?\nMORE\nFORD\nPage 18\nMR. STAFFORD: As you know, there are many deadlines\nand many studies that have to be made. In the rail area\nalone, we have some 20 studies or definitions that we have\nto work out. In that bill, it gave us certain time limits\nwe have to work those out. We are on time so far in most\nof those.\nWe think it is a good bill. We may not think\nso after we finish making some studies to find out what\nsome things may mean or not mean in the context of running\na railroad.\nMR. SCHMULTS: Thank you very much, George.\nDick Dunham, may we hear from you and the Federal\nPower Commission?\nMR. DUNHAM: The problem we found ourselves faced\nwith in the last three years is that the number of filings\nwith the Federal Power Commission have increased from 7,200\nto 15,315. Now, during that same period of time, the major\ndecisions reached, the resolutions increased by a great\npercentage, from 72 to 317 but, nevertheless, we are very\nmuch at the present time on a treadmill running faster but\ngoing backwards all the time.\nSo some of the procedural steps we have undertaken\nis first to establish a case control system for the Commission\nitself. It has been alleged by many people that we regulate\nthat some of their applications and filings have gotten lost\nin the Commission. We found that we could not disprove\nthat complaint. (Laughter) So essentially we adopted\na case control in order to get the track of filings.\nWe have adopted what we call a top sheet procedure.\nUnder the former practices every item of an application was\nsubject to the entire evidentiary process and both staff\nand all intervenors had to introduce testimony on all items\nof a pending application even though there was no dispute\non the facts or anything else. So we have adopted this\nprocedure where, if there is no dispute or difference of\nopinion in terms of the facts or the issues, or the\npolicies that are involved in a particular application, they\nwill be automatically settled up, which will allow, I hope,\nto raise to the service the issues probably subject to\nlitigation in a more formal procedure. We are very hopeful\nthat will help.\nOne thing this Commission cannot take credit for --\nbut we are now seeing fruition from -- is the regulatory\nagency processing procedures. We expect in 30 days that\nthe number of forms that we require in the regulated industry\nwill be reduced from 50 to 15. That is an even higher\nproportion in terms of the amounts of information that the\nregulated industry should furnish to us. It is not\ncombining 50 forms into 15 forms.\nMORE\nFORD\nPage 19\nTHE PRESIDENT: I was going to ask that.\nMR. DUNHAM: I anticipated that.\nSome of the forms required a lot of historical\nredundant information and we will update that. It is a\nsubstantial improvement and, assuming we get it through,\nI think it will have a very profound effect on the amount\nof information required from the industry and thereby the\nmeans of exchanging information with us.\nTHE PRESIDENT: Why do you have to go to GAO?\nMR. DUNHAM: Because new forms have to be cleared\nby law.\nTHE PRESIDENT: I thought it was OMB.\nMR. LYNN: It used to be that way. There is\na little tug of war going on in GAO as to how far the\nauthority extends.\nTHE PRESIDENT: That was included in the Alaskan\nPipeline bill.\nMR. LYNN: Yes, sir.\nThe Baperwork Commission is showing a great deal\nof interest in this area and had testimony from us at OMB\nand from the GAO with respect to the reach as to forms in\nthe regulatories, and a letter did go out from the Paperwork\nCommission to the heads -- or is about to, I don't know\nwhether it has been launched or not -- asking their cooperation,\nand I think we should see some real action there. I haven't\ntalked to everyone but the ones I have talked to on the\npaper matter as such -- which is linked to the whole\nregulatory process, but in some ways can be attacked\nseparately -- but Ifeel that everyone does want to cooperate.\nBut, as to that, whether the existing relationship is the\nright one as to the review of forms and what kinds of\nauthority, whether in OMB or some other place, that is an\nissue.\nMR. DUNHAM: We are not asking for new sets of\ninformation. It is just a different format. We have joint\njurisdiction in many cases with States, where the respon-\nsibility is split.\nWe work closely with the State\nregulatory agencies and to work out the same information we\ncan proceed on a joint basis. They will have access into\nour information and we will have access to theirs so we can\ncoalesce it, and I think that will have a real impact.\nAgain, it will be helpful in that both the States\nand Federal Government can begin with the same basic\ninformation instead of disputing whether somebody had a\ndifferent time period or why the figures are different. I\nthink there will be a great deal of payoff on that.\nMORE\nFORD\nPage 20\nAnother procedure is what we call effective\nplanning procedure where we solicit the regulated industry,\nour own staff and the general public on issues that they\nsee coming forward. The attempt here is to get us away\nfrom considering solely the case-by-case analysis.\nIt appears to us that, when you examine each\ncase, when you argue each case, when you analyze it and\neverything else, the ultimate resolution of the case has\nmany, many factors of law, economics and everything else\nand it is hard to pick out the theme, the policy theme that\nruns ahead of it.\nNow if we can establish this process, if we can\nset policy guidelines, rule-making guidelines, whatever,\nwhere the regulated industry and everybody, the general\npublic included, will have an idea of the guidelines, the type\nof things, the range of area instead of being, as it\nappeared to us, being caught in looking at each case,\nweighing the different factors involved in each case maybe\ndifferently or inconsistently with preceding or future\ncases.\nWe have undertaken or hope to undertake an\norganizational study of the Federal Power Commission.\nThere has been, that we can see, no major rethinking of\nhow the Commission itself was organized since about 1950.\nSo we think it is about time to look at the approach of\nthe organization.\nOther measures that we have taken to improve\npublic perception of the Federal Power Commission, we have\nagreed and have held meetings in other places, and\nWashington, D. C., to try to get a feel. We expect to\ncontinue that.\nWe are also experimenting with -- it is a difficult\nlegal matter -- holding joint proceedings with State\nregulatory commissions. Frequently in major hydro site\napplications, for instance, both the State has certain\npowers and the Federal Government has others. Sometimes\nthe resolution of matters are much delayed. It is a\ndifficult area but we are trying to work out ways to\naccomplish that.\nWe have decided to, and did adopt a resolution\nto open our public meetings to the general public for\nobservation. That is on all nonprotected matters. There\nare a lot of items that come within the Privacy Act but\nthe nonprotected areas will be discussed in a public forum\nso they can see how we arrive at decisions.\nMORE\nFORD\nPage 21\nTo go to your third section that you asked us\nto comment on, and for the problems that we see coming up,\nthe primary one is the natural gas situation. We are in\nalmost a very difficult position, as you are very well\naware, of trying to attract to the interstate market gas\nwhich, under our rules, under our process is priced at about\na third or fourth the price of nonregulated gas. It is a\ndifficult matter and we have not been that successful in\nadding additions to the interstate market.\nAside from the new gas price situation, leaving\nthat aside for a moment, it seemed to us it would be\nvery helpful if the law were changed, either added to or\nchanged slightly in the definitions under which we now\noperate, because the constraints that we operate under,\nour Natural Gas Act was adopted in 1938, and hundreds, if\nnot thousands of cases of litigation, many in all kinds\nof superior courts, many, many in the Supreme Court, which\nlimit and constrain the elements we can take into account\nin changing this equation.\nWe cannot, except to a limited extent, take\ninto consideration price factors, market factors, costs\nof alternative fuels, things like that, so that is a very\ndifficult thing. So, quite aside from the question of\nwhether price regulation should be discontinued, it would\nbe most doubtful unless there was some change that would\ngive us the latitude to perhaps begin again.\nMR. SCHMULTS: I think we are going to have to\nstep up the pace a little to keep on schedule.\nCarl, could we hear from you next?\nMR. BAKKE: Mr. President, when talking about the\nsubject of regulatory reform, I think we need to distinguish\nbetween administrative reform and substantive reform in\nthe administrative process.\nAdministrative reform, by and large, is susceptible\nof unilateral action by the agency whereas substantive\nreform is a matter that is in the hands of the Congress,\nby and large.\nWhat I would like to do today is to discuss the\ntwo conference topics in those terms. I think in doing so\nour most significant reform effort has been in the\nadministrative side through creation of an internal\ncommittee on expediting the hearing process. That is\nunder the guidance of Vice Chairman Morse, who is sitting\nright behind me today, one of our administrative law\njudges, the Commission's secretary and the deputy commission\ncounsel and the hearing counsel. We are publishing a\nproposed public procedure reform in the Federal Register\nand inviting comments.\nMORE\nFORD\nPage 22\nThis committee has been active since its inception\nand some of its recommendations to date have resulted in\nthe promulgation of sensitive target dates, the sequential\nsteps, discussion and final decision in commission\nproceedings, decisions and interlocutory appeals.\nIn addition, there have been amendments to the\nCommission's General Order 16 which includes establishment\nof a date by which evidentiary hearings before administrative\nlaw judges shall commence filing of complaints and motions,\nspecification of what must be contained in pleadings in\nmatters subject to the Commission's expedited procedures,\nand early commencement of first round discovery and\nestablishment of uniform procedures, such as depositions,\ninterrogatories, demands for production and request for\nadmissions.\nThere are additional procedural reforms that the\ncommittee has proposed and I would hope in the very near\nfuture to see those promulgated, as well. These include\npleadings comparable to those required by many district\ncourts for the purpose of narrowing the issues and\nidentifying statute or case law.\nAlso under consideration are special expediting\nprocedures for domestic rate cases and liberalization of\nauthority of our administrative law judges to interpret\nor modify commission orders of investigation in light of\ncircumstances arising as the proceeding goes forward.\nFinally, requirements of a more detailed\nspecification at the outset concerning terms and conditions\nof proposed joint agreements by ocean cargo carriers or\nothers.\nSo that, in a nutshell, I think, are the salutory\nconsequences of the Commission's attention to areas that are\nsusceptible of its own initiative. There are other more\nserious problems of a substantive nature that, much as we\nwould like to institute reform, we would require legislation\nand I think the most difficult single problem and the\nmost persistent problem that we have with respect to\nregulatory reform is the fact that the Congress has not\nyet established a comprehensive national transportation\npolicy.\nThe result of that is that the agencies find\nthemselves at cross-purposes or even in situations of head-on\nconflicts, as in the case of ICC Docket 261, that I am\nhappy to say was resolved by amicable negotiation rather\nthan litigation. But a year ago at this time it didn't\nlook quite as promising.\nMORE\nPage 23\nMoreover, the shipping laws that we are charged\nwith administering today just don't take into account\npresent day technology and, again, in the context of a\nnational transportation policy, this creates a great many\ndifficulties.\nFor example, ocean carriers may absorb inland\ntransportation charges to permit containerized traffic to\ngo to a single staging area rather than requiring the vessel\nto go into many ports in the same area.\nThis is done for many practical reasons because,\nif they can get all their containerized ocean cargo into\na single staging area, the costs required for handling\ncontainerized traffic can be minimized.\nNow, this particular issue of absorbing inland\ntransportation charges is a major issue in a substantial\nnumber of cases before the Federal Maritime Commission at\nthis point. This involves the so-called mini-bridge,\nmaxi-bridge, land-bridge modes of transportation which puts\nus over into the ICC's area of expertise and I am sure\nGeorge will say regulatory peremption but, be that as it\nmay, it is a serious problem and the question before\nthe Commission, very frankly stated, is whether absorbing\ninland transportation charges under circumstances I outlined\nare a violation of the shipping statute or permissible within\na rank of construction of the statute at the outer end\nof the spectrum.\nThe consequence is that the Commission staff\nand, above all, the shippers and the carriers and ports\nand hangers-on in general, are spending an exorbitant amount\nof time and do not reflect the impact in the real world\nof technology. In this case, it is the containerized ocean\ncargo but there are others as well.\nContainerization also impacts on port development\nand internal facility plants because of the capital\nintensive nature of the shore areas needed. If there is a\ntremendous area of economic impact that is absorbing an\ninordinate amount of time of our agency, and I am sure the\nICC and perhaps even the Civil Aeronautics Board, it arises\nout of the fact the statutes we are charged with administering\nare archaic.\nTHE PRESIDENT: Let me ask this, Carl: Is the\nCommission or are the related commissions preparing for\nsubmission to the Congress new legislation that would meet\nthe current requirements and related matters, or just doing\nnothing?\nMORE\nFORD\nLIBRARY\nPage 24\nMR. BAKKE: No, sir. Speaking for the Federal\nMaritime Commission, we are setting in motion a comprehensive\nand searching review both of our statutory authorities and\nthe regulations we have promulgated to implement those\nauthorities specifically with a view to updating them and\nstripping away the anachronistic or archaic features of\nour basic authorities, perhaps of necessity adding additional\nstatutory authority to optimize our functions in the real\nworld of today.\nI think by the beginning of the next session of\nCongress we will be in a position to come forward with a\nnumber of proposals in that respect with the benefit of\nMr. Lynn's good office in clearing off on them.\nMR. SCHMULTS: Thank you.\nCal, could we hear from you and the Federal Trade\nCommission? We will have to cut the next three presentations\nrather short as the President has a bill signing ceremony\noutside. Please be as brief as possible.\nMR. COLLIER: Mr. President, Lou Engman, as one\nof his last acts as Chairman of the FTC, wrote to you about\nsome of the specific steps that are being taken by the\nCommission that relate to your four-point program for\nregulatory reform, which I should add, we fully endorse.\nLooking forward, I am hopeful the Commission's\nefforts at cost benefit analysis can be institutionalized\nand expanded. This kind of analysis, done correctly, is\nno easy task. Equally difficult is the job of educating\nthe staff within the agency as to how to build high quality\nanalysis into their thought processes and recommendations.\nThis has to be used to predict the effects of proposed\nregulations and other actions and also to monitor and\nevaluate in retrospect what the effects of such actions were.\nRegulators can't be allowed to bury their mistakes in the\nCode of Federal Regulations.\nI have been particularly encouraged by reports on\na program that began when I was general counsel. This program\nwas designed to scrutinize the inventory of our accumulated\ntrade practice rules and guides dating back decades to\ndetermine whether they should be rescinded. To date, and\nafter public comments, 61 such rules and guides have been\nreviewed and over 90 percent revoked. Another 90 or so\nwill be going through the same process in the coming months.\nYour call for competition as an alternative to\neconomic regulation is sweet music to the commission's\nears. We believe that is what the FTC is all about.\nMORE\nFORD\nPage 25\nPt rhaps the most attractive areas for reform are\nregulatory (elay and consumer under-representation. As\nwe are ofter reminded by the Bar and occasionally the\ncourts, one man's delay can be another marr's due process.\nWe have made progress here both by changing our procedural\nrules and by better management, and that has resulted,\nfor example in a 33 percent reduction in the average age\nof pending investigations during the last year.\nEffective consumer participation in commission\nproceedings is made very difficult by the high costs that\nsuch participation entails. And although we are open to\nsuggestions from sister agencies who face similar problems,\nI confess that we don't yet have all the answers on that one.\nMR. SCHMULTS: Thank you, Cal.\nDick Simpson, may we hear from you on the Consumer\nProduct Safety Commission?\nMR. SIMPSON: Our commission is about three years\nold and we have authority over about 10,000 products. We\nhave undertaken several initiatives over the last three\nyears to increase and involve consumers in our activities\nand it works throughout our agency. We have a meeting policy\nthat requires every meeting with any official in our agency,\ndown to the lowest level, with outside parties to be open\nto the public, to be announced in advance, and anybody in\nthe United States is invited to attend. It really does\nwork and isn't very expensive. Generally, no one else shows\nup but there is no speculation as to what went on and what\narm-twisting there was.\nWe have also had very effective volunteer efforts\nfrom consumers. We asked for help and have trained over\n4,000 citizens from all walks of life, retired citizens\nand students who have helped in surveillance projects in\nindustry. We have tried to improve our ability to set\npriorities in a rational way and measure cost of the\nactivities we undertake and the benefits. We have not\ncompleted our estimates on that job, but we stand behind\nour estimates.\nThe regulations by the industry that will be\ncompleted this year will prevent about 65,000 injuries\nthis year, and included in those are injuries by ingestion\nof aspirin by children; a similar reduction in deaths of\nchildren under age 5 in prescription medication deaths.\nWe have undertaken from the outset several\nactivities to encourage self-regulation. I particularly\nbelieve in that. I am not cut out to be a regulator but\nhere I am. We have encouraged our technical staff --\ntechnical and scientific staff, to participate in activities.\nThey have been doing that for three years. It does not\ninfringe on our ability to regulate.\nFORD\nMORE\nPage 26\nWe have been citing voluntary standards that have\nbeen developed and are being followed. We are pleased to\ndo that.\nThe apparel industry is one that Jim is aware\nof from our mutual time in Commerce with the Inflammable\nMaterials Act. The apparel industry has not only gone\nway beyond the Federal efforts -- we have mandatory\nregulations on children's sleepwear -- they have extended\nvoluntarily the fire retardant regulation to other apparel.\nIn my personal opinion, there is no longer any\nneed for any additional mandatory standards in this field.\nIn three years I wouldn't have believed it possible. It\nis an example of what can be done.\nIn deregulation, I think last July Lou Engman\nwas the first speaker and he suggested if there was a trap\ndoor under about 50 percent of the chairs and somebody pulled\na lever -- and we have been working on efforts in a sense\nto fashion our own trap door. We have put together a plan,\na six-year plan, and we have submitted it last September to\nOMB and the Congress and that plan predicts the ability\nto abolish this agency, an agency only three years old, in\nsix more years. It would abolish it because we believe\nour task is a finite task and we believe rational people\nwould come to the conclusion consumer products no longer\npresent a grave risk.\nIt is a bit of a change and we haven't gotten\nacceptance of it, but I would suggest that every agency\nput forward such a plan because not only is it beneficial\nto keep from going into a counterproductive mode but it\nmakes possible some meaningful oversight by the Congress.\nRight now I am of the feeling the oversight is not very\nmeaningful.\nOn another line, I might mention we share in\ncommon with Bill Anders -- our agency does, FDA and OSHA,\nand some of the other agencies not here -- that is, nuclear\nsafety, similar problems -- fluro-carbon ozone, Red Dye 2\nand Red Dye 40 -- the whole matter of carcinogens associated\nwith the environment.\nI have been trying to create a mechanism called\na science court as a regulatory forum to help agencies\nmake better social decisions in these kinds of areas. The\nsocial decision is, how safe is safe enough and is the\nrisk worth it. Implicit is economic risk, and risk to\ncitizens.\nBut in these problems I have outlined, they are\nthe kind of areas where the technology is very, very important\nand the technology is being debated in the public domain\nand we are getting trial by PR.\nMORE\nFORD\nPage 27\nSecretary Morton was briefed on this. I talked\nto Ed Schmults about it and Secretary Morton was briefed\nand I was hoping he would introduce it before he left.\nYour Advisory Committee headed by Dr. Raymond and Dr. Baker\nare aware of it. I would suggest if that court were in\nexistence today, it might influence the nuclear initiative\nin California.\nThe Westchester County Board of Supervisers\nunanimously recommended such a science court be convened\nto investigate Plant 3. I have discussed this with people\nnot only pro-nuclear or involved in it, but involved in\nthe same group are the environmentalists, the anti-nuclear\nforces from academia, and they also support such a concept.\nI think it would improve the decision-making process by the\nagency and, if the citizen is to vote, make it an informed\nvote.\nMR. SCHMULTS: I think that is a very interesting\nproposal and we are looking at that. It has been extremely\nhelpful.\nJohn, may we hear from you?\nMR. ROBSON: Very quickly, Mr. President, in the\narea of procedural reform and education, we created last summer\na procedural forum, an outside advisory group to which\nwe gave a six-month deadline and they met it and\ngave us recommendations. The committee then went out of\nbusiness.\nWe have their reforms under consideration and have\nimplemented some of them; for example, imposing on ourselves\na deadline of a number of days in which we have to act in\nrule making petitions filed before us.\nSecond, we have underway a system under which we\nwill be able, through use of our computer, to log in and\nchart through the agency every single action that is filed\nwith us and to set a deadline up the ladder so that, if it\nhasn't gone from point A to point B by the time it should have,\nwe want to know why and move it out.\nThird, in the area of burdensome reporting, we\nhave had underway for several months a review of all our\nreporting requirements. I will mention a couple.\nOne, we have reduced for the air freight forwarders\nby 14 forms a year and by 75 percent the reporting requirement.\nMost are small businessmen. Second, we are working with\nthe Federal Aviation Agency to have a single reporting\nto satisfy both agencies so they need file only one report\nto satisfy both of us.\nMORE\nFORD\nPage 28\nWe are trying to reduce extensively the burden\non people to get a charter program started. In the last\nseveral months we have made some great strides in the\ncharter areas. We introduced two brand-new charter forms\nand proposed another; each significantly liberalizes the\nopportunities for cost of charter transportation for the\nAmerican people.\nWe are pursuing an aggressive competitive route\nprogram as well as trying to push the forefront out in\nthe area of removing restrictions on carriers that are\nobsolete and unnecessary.\nWe have allowed a great many discount fares to\ngo into effect in the last several months and there is,\nindeed, such proliferation now that people are confused by\nthem.\nIn the areas of consumers, the CAB has had a\nconsumer office since 1970 and I think it does a pretty\ndecent job. Our movements in that area have been on\nspecific matters; for example, the excess baggage charges\nand free baggage allowance, increasing the free baggage\nallowance on international flights. We have now pending\na rule making to require the carriers to disseminate some\ntariff information so the ordinary consumer has a better\nidea what the fares are and how he can better avail himself\nof the cheapest one. We are struggling with the knotty\nproblem of bumping, which is small in number but great in\nvoice.\nFinally, in the area of economic analysis, we\ntestified this morning on the regulatory reform proposals\nthat are before Congress now. We have really been in the\nprocess of analyzing the future of the Board for several\nmonths and, let me just read the first sentence of our\ntestimony.\nIt says, \"Economic regulation should be redirected\nso domestic transport is governed by competitive market\nfactors.\" We have offered a program to Congress. I will\nleave it there.\nMR. SCHMULTS: Thank you very much, John.\nTHE PRESIDENT: Thank you very much, all of the\nchairmen and your associates from the various boards and\ncommissions. Unfortunately, I have to proceed with a signing\nceremony of legislation, so I won't be able to stay. I\nhave asked Ed Schmults to indicate to you what I would like\nin the months ahead.\nYour testimony today has been very helpful. I\nthink we have made significant progress. It is my feeling\nwe have to keep pressure on in order to further, at this\ntime, the progress.\nMORE\nFORD\n;\nPage 29\nI appreciate your appearance. I am grateful\nfor what has been done but we hope to see you in a few\nmonths and get additional reporting as to the success of\nyour subsequent efforts.\nI thank Ed and Paul for their leadership in this\nand, if you will excuse me, thank you very, very much.\nMR. SCHMULTS: I would like to reiterate what the\nPresident said. I thank you all very much for all the work\nyou have put into this meeting, each of you. We could\nhave taken up an hour and a half with the problems and\nprogress that each of you has made in your own agencies.\nTo keep the momentum going on this effort, the\nPresident asks if you would submit to him by September 15\nanother progress report on your efforts to achieve\nimprovements in the four areas concerned that he has\nmentioned. Those were the subject of your reports.\nHe has three specific requests he hopes you will\nkeep in mind as you prepare your next report; first, that\nspecial consideration be given as to how we can make\nyour progress--and our progress in the Executive Branch--as\nwell as our regulations more understandable.\nFor example, when you report on how you are\neliminating or improving your regulatory functions, the\nPresident would like to see a specific statement on how\nthe change will affect consumers, small businessmen and\ntaxpayers.\nSecond, if you would, the report should list and\ndiscuss priorities for agency reforms. Along with the\npriorities should be recommendations on where regulatory\nobjectives can be achieved in a less costly, less time-\nconsuming and more efficient manner. If we are going to\nshow results to the American people, we need to have a\nbetter idea of what our priorities are and how we are going\nto accomplish them. One of your first priorities should be\nwhere there is workable competition or where competition\ncould be increased if outdated regulations were eliminated.\nThird, the President asks all of you to concentrate\nalong with the Executive Branch agencies on achieving a 10\npercent reduction in the number of forms that Federal\nagencies require.\nIt has been said that our continued requests for\ninformation cost individuals and businesses billions of dollars\nin expenses every year. The cost of paperwork cannot any\nlonger be considered an incidental cost. Many small\nbusinessmen have pointed out it isn't worth it for them\nto hire two people in their business whose efforts are\ndirected toward filling out of forms instead of selling\nproducts and services.\nMORE\nFORD\nPage 30\nThe Committee on Paperwork is looking on the long-\nterm approach of reducing costs of paperwork. The President\nhas directed the Executive agencies to achieve a 10 percent\nreduction in number of forms by July.\nIn your September 15 report on your administrative\nreforms, he hopes you can also report on your contribution\nto achieving a reduction in reporting requirements.\nLet me say certainly on this side of the table\nwe are all convinced that all of us here and all of you\nare working toward the goal of making the Federal Government\nas responsive and efficient as humanly possible.\nThank you. We appreciate it.\nEND (AT 3:40 P.M. EST)\nFORD\nC.C. Teach\nTHE WHITE HOUSE\nWASHINGTON\nApril 13, 1976\nMEMORANDUM FOR:\nBOB HARTMANN\nFROM:\nED SCHMULTS EU\nThe President has tentatively agreed to address the Chamber\nof Commerce on April 26, 1976. I do not believe that any final\ntopic for that address has been chosen. As you may recall,\nhis address last year before the Chamber (which was on\nApril 28, 1975) was the first major outline of his regulatory\nreform program.\nSince that time, we have achieved considerable legislative\nand administrative progress. As the one year anniversary\nof this address, I believe it would be appropriate and useful\nif the President returned to the Chamber of Commerce and\noutlined the results that have occurred, and the bipartisan\nsupport he has received.\nAlso, it would be extremely useful to use this forum to\nannounce the long term regulatory reform action program\nwhich will lead to fundamental reform in the government's\nrole in the economy.\nIf you agree, I will provide a first draft of the address by\nSaturday, April 17, 1976.\ncc: Dick Cheney\nJim Cannon\nBill Seidman\nFORD & LIBRARY GERALD\nOUTLINE OF PRESIDENTIAL REMARKS ON REGULATORY REFORM\n- Exactly one year ago this coming Wednesday, I outlined\nbefore you my program of regulatory reform.\n- Since that time, we have made important progress in this\ncritical area, progress that moves us towards an open and\nvigorous free market, less paperwork, more intelligent\nregulation and more opportunity for businessmen to run\ntheir own businesses. However, we have a long way to go.\n- I want to outline our successes, the current Congressional\nand Administration cooperation and new directions that will\nfurther our goals.\n- The goals of my Administration in regulatory reform are:\n- to make sure that government policies do not infringe\non individual choice and initiative.\n- to reduce government intervention in the market\nplace.\n- to find better ways to assure that scarce economic\nresources are used most efficiently so that we fulfill\nour desirable social goals at minimum cost.\n- to improve our ability to ensure that public expen-\nditures benefit the public as a whole and that govern-\nment policies are equitably enforced.\n- to make sure the public interest rather than\nspecial interests benefit from government programs.\n- We have had some outstanding successes:\n1. We have reversed the trend of paperwork growth and\nI can announce that we will have a reduction of 10% in\nthe next few months.\n2. I have met twice with the Independent Regulatory\nAgencies and they are demonstrating increasing progress\nin reducing delay and unnecessary regulations - (cite\nexamples).\n3. The first lessening of ICC regulation of the railroads\nsince the creation of the agency in 1887 has been signed\ninto law and I have introduced the first major reform\nof airline and trucking regulation since the 1930s.\n2\n4. The Senate has passed the Financial Institutions\nAct which is the most sweeping reform of banking reg-\nulation in over 40 years.\n5. We have achieved the first competition in the secur-\nities markets in almost 200 years.\n6. We have repealed the fair trade laws which were on\nthe books for over 40 years and which unnecessarily\nheld prices up for the American consumer.\n7. Etc.\n- The Congress has begun to take this issue seriously and we\nhave made important bi-partisan progress. Last June, I met\nwith 24 Congressmen and Senators, Democrat and Republican,\nand we agreed to work together on the common problem of\nunnecessary regulation. (Mention specific Congressmen and\nSenators, e.g. John Anderson, Percy, Kennedy, Jordan, etc.)\n- This Administration will not rest on these results. Even\nthough they are far in excess of what our critics thought\npossible.\n- I have commissioned several task forces to examine and im-\nprove OSHA and other agencies' regulatory processes which\nhave been particular problems in the past.\n- Finally, I am announcing that my Administration will shortly\nbe submitting legislation to fundamentally review the impact\nof the government on the economy and on business. However,\nthis won't be just another study. It will result in action\n-- legislative and administrative. The President and the\nCongress will be required to take action to resolve these\nproblems.\n- Together we must work toward reforming government. Busi-\nnessmen, consumers, and the government must take the long\nview. Our economy can grow only if the government is not\npart of the problem but is part of the solution.\n- Etc. and closing.\nTHE WHITE HOUSE\nWASHINGTON\nApril 19, 1976\nMEMORANDUM FOR:\nBILL SEIDMAN\nED SCHMULTS\nFROM:\nSTEVE McCONAHEY\nsem\nSUBJECT:\nRegulations Review\nIt is my understanding that the regulatory reform effort is\nbeginning to focus on the regulations of the Federal depart-\nments and independent agencies. Given the fact that these\nregulations have a major impact on state, county and local\ngovernment, I would like to raise the intergovernmental\ndimension of regulation reform and offer some suggestions\non the approach to this problem.\nTwo of the Administration's major themes have been the re-\nduction of excessive government, and the return of essential\ndecision authority to state and local governments. The block\ngrant initiatives, revenue sharing, the regulatory reform\nlegislation are existing actions in support of these themes.\nHowever, there has not been to date a sustained government-\nwide effort to overhaul the maze of burdensome regulations\nthat prescribe to state and local officials how Federally-\nsupported programs are run. In most instances, these regulations\nincrease the cost of Federal assistance programs, complicate\ntheir administration, and impose unwanted features. To many\ngovernors and mayors, the burden of these regulations seems to\noutweigh the benefits of the programs.\nBased on our intergovernmental perspective, and on the observa-\ntions that state and local officials have made on other White\nHouse or agency reviews and studies, I offer the following\nrecommendations for the next phase of regulation review:\n1. Focus the review effort on regulations surrounding\nFederal assistance programs.\nThe majority of agency administrative regula-\ntions deal with Federal public assistance programs\nand largely affect the delivery of such diverse\nservices as health care, income support, food\nstarips, job training assistance, and housing.\n- 2 -\nThese are highly visible programs that impact\non the great majority of the American people.\nThe regulations for administering these programs\nare, in many cases, adversely affecting the\nability of state, county and local governments\nto deliver the needed services. As stated in a\nrecent National Journal article:\n\"\noverly detailed administrative\nregulations in many areas not only\nfail to achieve their purposes but\nfail precisely because of the bur-\ndens they place on state and local\nmanagement. \"\nMy review of the \"targets of opportunity\" being\nreviewed by the EPB suggests a continued focus on\nregulations affecting the private sector and the\nconsumer.\nAs an alternative, I believe we must focus the major\nportion of our efforts on the domestic assistance\nprogram regulations - if we do not, we will be over-\nlooking one of the major contributing factors to\nexcessive government and bureaucracy.\n2. Provide full-time, sustained White House oversight\nof in-depth, priority agency reform efforts.\nThe regulatory reform effort to date has been\nessentially the work of a Domestic Council review\ngroup coordinating specific legislative projects\nand monitoring agency regulation activities. The\nperformance of the departments and agencies in re-\nviewing their own regulations has been, however,\nuneven and sporadic. Moreover, because of the\nfocus of the work to date, and because of limited\nresources, the review group has not been able to\ndevote full time to this effort. Given the unique\nmanagement and bureaucratic problems associated\nwith the regulation of domestic programs, I believe\nthat we must approach this reform effort quite dif-\nferently than our approach to date.\nThe problems we are trying to overcome have a\nstaying power that historically outlasts the\nlife of any task force or review group.\n- 3 --\nThe most contemporary and startling example\nof this is what is happening to the CETA program:\nwhere sound and well-established legislative and\nadministrative simplification and reform is being\neroded through the gradual reimposition of old\nadministrative practices and rules.\nIf we are to move beyond identification of reform\nopportunities to the actual implementation of im-\nprovements, I believe there must be two types of on-\ngoing oversight:\n(a) Full-time White House Oversight. Tough\nand experienced White House management\nof this effort will: give the effort a\nclear Presidential mandate; signal this\nmandate to the departments and agencies;\nrespond to the criticism of state and local\nofficials, who will give the effort full\nsupport if they perceive the effort to be\na priority; and, insure the objectives are\nachieved in a timely and visible manner.\n(b) Agency Participation and Commitment. The\nagencies must feel the pinch and be held\naccountable for the progress of this ef-\nfort. A critical element of real reform\nis in-depth agency involvement. Histori-\ncally, the White House has been ineffective\nby itself in imposing from the outside the\ntype of reform needed here. It requires\nagency commitment and full participation.\nOne suggestion is the use of the Under\nSecretaries as the officials charged with\nin-house oversight, and who would work\nclosely with and under the White House\noversight official (s).\n3. Provide for input from and participation by state,\ncounty and local officials.\nNo group is more aware of the problems from excessive\nFederal regulation than those charged with the day-to-\nday administration of the regulated programs. More-\nover, these officials collectively represent an\neffective force to help marshall support for these\nreforms, particularly where legislative adjustments\nare required. The participation of state and local\nofficials is essential, both substantively and politically.\n- 4 -\nAt the same time, we must avoid a \"mess chart\"\nsituation with a tangled maze of ongoing reform\nefforts. Already a number of agencies have\ninitiated regulation review efforts, including\nHEW, Treasury, FEA and EPA. Secretary Mathews,\nfor example, has initiated three task force ef-\nforts with the New Coalition, two of which pertain\nto regulations. Secretary Simon has initiated\nselective projects with the National Governors'\nConference (NGC). Most recently, Jim Lynn com-\nmitted to respond to priority management and\nregulation issues identified by the NGC.\nFor these reasons, I recommend that this effort\ninclude the following elements:\nInputs from state and local officials\nto help focus the effort (perhaps\nthrough an advisory committee, with\nmembers like Governor Dan Evans).\nCoordination and encouragement of\nreform work presently underway in\nthe agencies, thereby avoiding du-\nplication of efforts.\nChanneling of inputs from state and\nlocal officials, and their public\ninterest groups, to avoid overloading\ntheir capacity to respond.\nSummary\nThe achievement of the President's goals of reducing big\ngovernment and rebalancing federal-state relations requires\nthat we focus much of our regulatory review effort on public\nassistance programs, and that we directly involve the officials\nresponsible for the administration of these programs in the\ndepartments and agencies. We must have strong, full-time and\nsustained commitment both at the White House and at the top\nleadership of the agencies. And, we must orchestrate the\nvarious efforts now underway to maximize the input from state\nand local officials.\n- 5 -\nGiven the intergovernmental charter of my office, I am\navailable to provide whatever assistance I can to achieve\nthese objectives. I consider this a problem area of the\nutmost urgency, one that we can make quick and visible\nprogress with, and which, if properly approached, will\nmeasurably accomplish the President's commitment to re-\nduce the burden of the Federal government.\nI would like to have an opportunity to discuss this memorandum\nwith you."
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