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Regulatory Reform Issue [1981] (3)
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Regulatory Reform Issue [1981] (3)
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STATEMENT
OF
JAMES C. MILLER III
ADMINISTRATOR FOR INFORMATION AND REGULATORY AFFAIRS,
OFFICE OF MANAGEMENT AND BUDGET
AND
EXECUTIVE DIRECTOR,
PRESIDENTIAL TASK FORCE ON REGULATORY RELIEF
BEFORE THE
SUBCOMMITTEE ON REGULATORY REFORM OF THE
COMMITTEE ON THE JUDICIARY
OF THE
UNITED STATES SENATE
(May 14, 1981)
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here this morning, along with Chairman
Weidenbaum, to discuss our mutual efforts to improve the
regulatory process. With us today is C. Boyden Gray, Counsel to
the Presidential Task Force on Regulatory Relief.
As you know, many efforts have been mounted over the past
several years to improve the performance of the regulatory
agencies, and this Subcommittee has performed a Herculean task in
identifying problems of regulatory procedure and finding
solutions. The bill before you, I know, is the product of
extensive discussions involving Members of this Subcommittee,
leaders of the private sector, and key officials in the
Administration, including the Chairman of President Reagan's
-2-
Task Force on Regulatory Relief, Vice President George Bush.
Moreover, we have had a close, cordial, and productive working
relationship with you and your staff and look forward to its
continuation in the future.
Before I discuss the details of S. 1080, the proposed
"Regulatory Reform Act", I would like to review briefly the
President's progam of regulatory relief and discuss our early
experience under Executive Order 12291, "Federal Regulation."
President's Program of Regulatory Relief
As one of the four cornerstones of President Reagan's
economic recovery program, regulatory relief is clearly one of
the top priorities of this Administration. The four cornerstones
are:
O
A stringent budget policy to restrain federal spending
and put more resources in the private sector where they
are more productive;
O
A tax reduction program to encourage saving and
investment;
O
A program of regulatory relief to achieve regulatory
goals at lower costs in order to increase the supply of
goods and services available for other pressing needs;
and
O
A stable monetary policy to reduce uncertainty and
encourage greater investment by businesses and more
rational expenditures on the part of consumers.
-3-
The four components are complementary. They share the basic
philosophy of increasing overall economic activity in order to
increase productivity, reduce inflation and unemployment, and
raise the real incomes of all Americans.
During his first months in office, the President took swift
and positive action to eliminate excessive and ineffective
regulations. Let me take just a minute to outline some of these
actions for you.
On the day after the Inauguration, President Reagan asked
the Vice President to chair a Cabinet-level Task Force on
Regulatory Relief. The Task Force is responsible for reviewing
new regulations, assessing existing regulations, and coordinating
legislative policies in the regulatory area. As I mentioned, the
Task Force is chaired by Vice President Bush, but it also
includes as members: Treasury Secretary Regan, Attorney General
Smith, Commerce Secretary Baldridge, Labor Secretary Donovan,
Office of Management and Budget Director Stockman, Assistant to
the President for Policy Development Anderson, and Council on
Economic Advisers Chairman Weidenbaum. As the Vice President has
noted, the charge given to his Task Force is not to study
regulation or deregulation, but to provide regulatory relief.
Eight days later, on January 29, the President sent a
memorandum to the heads of eleven cabinet departments and the
Environmental Protection Agency, asking them to postpone for 60
days -- until March 30 -- the effective dates of all final
regulations that had not yet taken effect. He also asked the
agencies not to issue any additional final regulations during
-4-
this period. This action was taken to allow time for the
President's appointees to familiarize themselves with the details
of the so-called "midnight regulations" and other proposed new
rules.
On February 17, President Reagan issued Executive Order
12291, "Federal Regulation," designed to improve regulatory
performance and provide regulatory relief.
The President's program of regulatory relief goes beyond new
regulations to include existing regulations. On March 25,
building on the President's previous actions, Vice President Bush
released a list of 27 existing regulatory programs which agencies
had agreed to reassess. The Task Force and the agencies will
continue to review and identify additional areas where review of
existing rules and regulatory programs is necessary. The Vice
President also asked the assistance of business, labor, consumer,
and other groups in identifying regulations in need of recission
or modification. We have received over 200 detailed and
sophisticated submissions in response to that request. In
coordination with the responsible agencies, we intend to use
these submissions to help establish the regultory priorities of
this Administration.
Almost every Cabinet department and agency has taken
important steps to provide regulatory relief. For example, the
Department of Transportation has proposed changes in a number of
regulations, especially those affecting the automobile; the
Department of Energy has targeted some 200 regulations for
thorough review; the Department of Labor's own Regulatory Reform
-5-
Task Force has begun a careful review of regulatory proposals and
existing programs to find ways of achieving health and safety
goals at lower costs.
These actions are only a first step in achieving meaningful
regulatory relief. Although it is too early to have final
figures, preliminary results have been gratifying. I can assure
you that the relief measures taken by the agencies amount to
billions of dollars per year. And we are only beginning. Much
more will be done in the coming months. Regulatory relief is
essential to economic recovery. The President himself has made
it clear that he expects real regulatory relief and we intend to
carry out his mandate and that of the American people.
Executive Order 12291
Now let me address our experience under Executive Order
12291. I would like to point out that the Executive Order has
only been in place since February 17, and our experience has
understandably been too short to predict precisely what the final
results will be. However, I can say with certainty that the
first three months have been very encouraging.
The Executive Order consists of three major parts. First,
it sets out the President's regulatory principles. Under these
common-sense principles, an agency is directed not to regulate
unless the benefits of the rule exceed the costs; the least
costly alternative is chosen; and the regulation maximizes net
benefits.
-6-
Second, the Presidential Task Force on Regulatory Relief is
clearly established as the primary oversight body with regard to
Executive-branch regulatory policy.
Third, the Executive Order creates a review process
directing the Office of Management and Budget, under the
direction of the Presidential Task Force, to review proposed
regulations and consult with agencies about them. It calls for
OMB to identify existing regulations which agencies should review
and for OMB and the Task Force jointly to develop legislative
proposals where needed in the regulatory area.
To date, over 658 rules have been submitted by 23 Executive
and "independent" agencies:
Department/Agency
Submissions
Agriculture
101
Commerce
38
Community Services Administration
1
Education
34
Energy
17
Environmental Protection Agency
161
Federal Emergency Management Agency
5
Federal Inspector for Alaska Natural
Gas Transportation
4
General Services Administration
13
Health and Human Services
15
Housing and Urban Development
37
Interior
22
Justice
15
Labor
31
National Foundation on the Humanities
5
Nuclear Regulatory Commission
1
Office of Personnel Management
10
Small Business Administration
2
State
2
Transportation
110
Treasury
1
U.S. Metric Board
3
Veterans Administration
30
Total
658
-7-
I might note that, taken together, the Departments of
Transportation, Agriculture and the Environmental Protection
Agency account for over half of these rules.
The rate at which regulations are being issued by agencies
has slowed significantly as well. The number of new final and
proposed regulations is down by more than a third since January,
and the average number of pages published daily in the Federal
Register has been cut by more than half.
With regard to our experience under the Executive Order, two
points deserve particular emphasis. First, we have found that
flexibility is crucial. It is simply not possible to anticipate
all the issues that surface in the regulatory area. I believe
that such unforeseeable situations demand flexibility on the part
of the institutional arrangement assigned to address these
issues. Second, the authority to waive regulations and to
identify certain other regulations as "major" is another crucial
element in the Executive Order. The authority granted under the
order permitting us to exempt certain classes of regulations
prevented the program from being brought literally to a
standstill. The authority to designate rules as "major" keeps
agencies on their toes and allows us to identify especially
burdensome or controversial regulations for review, even if
ordinarily they would not qualify as "major".
The Task Force is still learning how best to deal with the
business of regulatory relief. It is important that hard and
fast requirements not be imposed which could block new and
effective regulatory relief measures.
-8-
Comments on S. 1080
Mr. Chairman and Members of the Subcommittee, we in the
Administration heartily support the goals of S. 1080. As our
Executive Order indicates, we believe it essential to perform
analysis for major new and existing regulations and to choose the
most cost-effective means of achieving a statutory goal. While
we can achieve these goals under the Executive Order, there is a
clear benefit to codifying these requirements in legislation.
The basic concepts embodied in S. 1080, we believe, hold the
potential for providing the long-lasting reform of the regulatory
process that is vitally needed.
As with much legislation, an appropriate balance must be
stuck between detailed legislative provisions and the need for
flexibility. For the most part, I think S. 1080 achieves this
goal.
The bill addresses the pervasive problems of agency reliance
on undisclosed or questionable scientific data and the current
inadequacies of rulemaking files. The bill would require an
agency to disclose at the outset the studies on which it intends
to rely and to make those studies and all other relevant material
available for public comment. These are important provisions and
we support them.
The bill also provides for what has come to be known as
"hybrid rulemaking" for major rules. The opportunity for oral
presentation and cross-examination in major rulemakings, we
believe, can strengthen the regulatory process by providing close
scrutiny of matters of material fact. As the sponsors of the
-9-
bill recognized, it is also important to limit the scope of
judicial review on such procedural issues, and we in fact would
suggest that the provision for judicial review be even more
carefully circumscribed.
The bill also contains important provisions eliminating the
"race to the courthouse" problem that exists under the current
venue provision and establishing a regulatory agenda and
calendar. In both cases, the bill makes an important
contribution towards improving administrative practice.
The centerpiece of the bill, from our perspective, is its
provision requiring careful economic analysis of major rules.
All too often in the past, rules were issued with little or no
consideration of their economic consequences. That will not
happen under this Administration, and it should not happen under
any subsequent Administration. This is an area, however, where
the balance between effective legislative prescriptions on the
one hand and needed Executive-branch flexibility on the other is
particularly difficult to accomplish. With just a few changes,
we believe that S. 1080 can achieve that balance.
Essentially, what is required is an Executive-branch
oversight mechanism that grants the President or his designees
authority to designate major rules and to enforce compliance with
provisions of the proposed legislation. This would reduce the
role of the courts in these areas. We also believe that it would
be simpler to put the new procedural provisions in a new Chapter
6 of the Administrative Procedure Act, rather than run the risk
-10-
of unintentionally complicating the well-understood provisions of
existing Chapter 5. Finally, we think that the first definition
of "major rule" should be limited to rules that would increase
enforcement or compliance costs by $100 million or more. As it
now stands, a full economic impact analysis would be required for
even minor changes in major existing rules.
Our concern here is two-fold. First, we want to ensure that
enactment of the bill would not hamper the Administration's
efforts to achieve regulatory relief. Second, we want to avoid
the danger of creating opportunities for litigation --
particularly litigation over the adequacy of an agency's analysis
-- that could be used to frustrate, rather than promote,
regulatory relief. To the extent there is judicial review of
whether a rule is "major", we believe it should be limited to the
bright line test of the $100 million increase in compliance and
enforcement costs. The other two tests are too vague to permit
useful judicial review.
In connection with judicial review, we should add one point
about the Bumpers Amendment. We believe that the bill's
provision eliminating any presumption of validity with respect to
an agency's assertion of power or jurisdiction beyond its
statutory authorization raises no serious problem. Indeed, under
the Executive Order we are committed to achieving this same
objective. But other presumptions not involving agency
jurisdiction or power --- such as those relating to procedural
regularity, statutory interpretation of technical or scientific
-11-
provisions, and an agency's own rules -- serve a useful purpose
in focusing judicial review on the issues of significance.
Moreover, elimination of those presumptions could create needless
uncertainties and litigation.
With these and other minor changes, we believe that
enactment of S. 1080 would result in a significant and enduring
improvement in the substance and procedures of regulatory
decisionmaking. The bill's approach is comprehensive and is
based on a well-reasoned understanding of the nature of the
regulatory problem and what can be done to correct it. In this
regard, we are particularly pleased that the bill's major
rulemaking provisions will not become effective until January 1,
1983. This delayed effective date does not undercut in any way
the urgency of the problem, but rather evidences a realistic
appreciation that it will require time for the agencies to adapt
to the new demands being placed upon them. As I pointed out
earlier, we are only in the initial stages of implementing the
Executive Order. We are learning constantly. This bill would
allow that learning process to continue, to the ultimate benefit
of the regulatory process itself. Thus, we strongly support
Section 8 of the bill.
Mr. Chairman, Members of the Committee, that completes my
prepared statement. Mr. Weidenbaum, Mr. Gray, and I shall be
happy to address any questions you might have.
1
5/4
Frank:
Would you please skim to make sure okay for me to
send letter under JAB signature saying:
thanks for bringing this material to my attention,
appreciate your support, will pass along to appropriate
WH staff members, etc.
Thanks.
KC
jun miller
- Want to work with haralt
- Rood beginning
Throsday
Daniellon
- afraid of landing up
House
5/7
- Dectify next week
Sen Govt
- Vertimony on Danilson bill
5/12
Jud (Lay
5/14
PAUL LAXALT
NEVADA
United States Senate
WASHINGTON, D.C.
April 30, 1981
Dear Mr. Baker:
Today I introduced the "Regulatory Reform
Act" with the co-sponsorship of seventy-three
of my colleagues in the Senate. I believe this
legislation will be a major contribution to the
President's program to bring regulatory relief to
the productive sector of our economy. I am
encouraged by the broad support this proposal has
received, demonstrating that a majority of the
Senate joins the President's commitment to limit
the explosive growth of the federal government and
to restore some rationality to the regulatory
process.
For your review, I am enclosing a copy of
the bill, a summary of its provisions and my
introductory remarks.
Sincerely
PAUS
U.S. Senator
PL/cag
Enclosure
Mr. James Baker, III
Chief of Staff/Assistant to the President
The White House
Washington, D.C. 20500
STATEMENT OF
SENATOR PAUL LAXALT
INTRODUCING
THE REGULATORY REFORM ACT
MR. LAXALT. MR PRESIDENT, I RISE TODAY TO INTRODUCE THE
"REGULATORY REFORM ACT" FOR MYSELF AND THE DISTINGUISHED
SENATOR FROM VERMONT (MR. LEAHY), AND FOR A HOST OF OUR
COLLEAGUES. AS THE BROAD SUPPORT FOR THIS BILL INDICATES,
A MAJORITY OF THE SENATE, OF WHATEVER POLITICAL OR PHILOSOPH-
ICAL STRIPE, BELIEVES THAT SIGNIFICANT CHANGES IN THE REGULA-
TORY PROCESS ARE VITALLY NEEDED.
THOUGH THIS LEGISLATION IS STYLED AS A "REFORM" BILL, ITS
PROPONENTS ARE ACTING -- UNFORTUNATELY -- WITHIN A TRADITION AS
OLD AS THIS NATION. IN 1776, THE FOUNDERS COULD INDICT KING
GEORGE III BECAUSE, IN THE WORDS OF THE DECLARATION OF INDEPENDENCE,
"HE HAS ERECTED A MULTITUDE OF NEW OFFICES, AND SENT HITHER SWARMS
OF OFFICERS- TO HARASS OUR PEOPLE
=
MR. PRESIDENT, AT THE OUTSET I WISH TO ACKNOWLEDGE THE
MAJOR CONTRIBUTION TO THIS BILL MADE BY THE SENATOR FROM VERMONT
(MR. LEAHY) AND HIS CAPABLE STAFF. AS THE RANKING MINORITY
MEMBER OF THE SUBCOMMITTEE ON REGULATORY REFORM, SENATOR LEAHY
SHARES WITH ME A GENUINE COMMITMENT TO RESPONSIBLY DEALING WITH
THE VERY SERIOUS PROBLEMS OF THE FEDERAL REGULATORY PROCESS.
THOUGH WE EACH EMBRACE DIFFERENT PHILOSOPHIES OF GOVERNMENT,
SENATOR LEAHY'S COOPERATION AND HIS DILIGENCE SERVED TO MAKE THE
DRAFTING OF THIS BILL A TRUE PARTNERSHIP EFFORT.
UNDENIABLY, WE DIFFERED IN OUR APPROACH TO A NUMBER OF
DISCRETE POLICY ISSUES. CONSEQUENTLY, THIS BILL EMBODIES A
-2-
SERIES OF REASONABLE COMPROMISES. I EXPECT THOROUGH DEBATE
OF THESE ISSUES DURING BOTH COMMITTEE AND FULL SENATE CONSIDERA-
TION OF THIS LEGISLATION. I STAND READY TO VIGOROUSLY PARTICIPATE
IN THE AMENDMENT PROCESS AT EVERY LEVEL AS MAY BE NECESSARY.
MR. PRESIDENT, I MUST ALSO ACKNOWLEDGE THE LABORS OF OTHER
COLLEAGUES IN THE DEVELOPMENT OF THIS BILL. THE DISTINGUISHED
CHAIRMAN OF THE COMMITTEE ON GOVERNMENTAL AFFAIRS (MR. ROTH)
AND HIS STAFF PLAYED A CENTRAL ROLE IN THE DRAFTING OF THE
LEGISLATION. MY OWN CHAIRMAN ON THE JUDICIARY COMMITTEE, THE
DISTINGUISHED SENATOR FROM SOUTH CAROLINA (MR. THURMOND), GUIDED
OUR WORK AND ADVISED US AT EVERY STEP. UNDER THE LEADERSHIP
OF THESE TWO CHAIRMEN, I ANTICIPATE NOT ONLY A FAIR AND
ORDERLY AIRING OF DIFFERING VIEWS, BUT THE ULTIMATE PASSAGE
OF REGULATORY REFORM LEGISLATION OF WHICH THE SENATE CAN BE
PROUD.
IN A VERY REAL SENSE, THIS BILL IS A PRODUCT OF THE WHOLE
SENATE. ITS PROVISIONS SPRING GENERALLY FROM THE EXTENSIVE
DEBATES OF PAST CONGRESSES. ITS PROPOSALS HAVE BEEN SHAPED
BY THE IDEAS ADVOCATED BY MANY OF OUR COLLEAGUES OVER THE YEARS.
IN THE PROVISIONS FOR REGULATORY AND COST-EFFECTIVE ANALYSIS OF
REGULATIONS WE SEE THE HANDIWORK OF THE DISTINGUISHED SENATORS
FROM KANSAS (MR. DOLE), FROM ARIZONA (MR. DECONCINI), FROM
WYOMING (MR. SIMPSON), FROM ALABAMA (MR. HEFLIN), AND FROM
TEXAS (MR. BENTSEN). AND, OF COURSE, THE MODIFICATION TO THE
LAW GOVERNING JUDICIAL REVIEW OF AGENCY ACTIONS HAS LONG BEEN
PROPOSED BY OUR DISTINGUISHED COLLEAGUE FROM ARKANSAS (MR.
BUMPERS).
-2A-
FINALLY, MR. PRESIDENT, I WOULD BE REMISS NOT TO EXPRESS
MY PERSONAL THANKS TO CONGRESSMEN KINDNESS, MCCLORY, AND
MOORHEAD, TO THE HOUSE REPUBLICAN LEADERSHIP, AND TO THEIR
EXTRAORDINARILY ABLE STAFF. TOO OFTEN, MEMBERS IN EITHER
HOUSE OF THE CONGRESS TEND TO FORGET THE IMPORTANCE OF THE
"OTHER BODY." FROM THE BEGINNING, WE WORKED WITH THESE
GENTLEMEN TO TAKE ADVANTAGE OF THEIR IDEAS AND DRAFT A BILL
WITH THE CONCERNS AND EXPERIENCE OF THE HOUSE IN MIND.
CONSEQUENTLY, THIS BILL HAS BEEN SHAPED MOST BENEFICIALLY
BY OUR LABORS TOGETHER. A HOUSE COMPANION TO THE BILL IS
ALSO BEING INTRODUCED TODAY.
-3-
THE RATIONALE FOR REFORM
MR. PRESIDENT, AS WE INTRODUCE THE REGULATORY REFORM
ACT AND BEGIN SENATE CONSIDERATION OF IT, WE MUST KEEP CLEARLY
BEFORE US BOTH THE PROBLEMS THIS LEGISLATION ADDRESSES AND THE
REMEDIES IT PROPOSES. "REGULATORY REFORM," AFTER ALL, IS A
BROAD AND IMPRECISE TERM WHICH HAS BEEN APPLIED TO A VARIETY OF
GOVERNMENT EFFORTS. CERTAINLY THE NEW POLICIES AND PROCEDURES
FOR RULE MAKING IMPLEMENTED ADMINISTRATIVELY BY THE REAGAN
ADMINISTRATION COMPRISE THE CUTTING EDGE OF REGULATORY REFORM,
AS DOES THE APPOINTMENT OF NEW INDIVIDUALS TO FILL AGENCY POSTS.
SIMILARLY, MODIFICATIONS TO THE VARIOUS ORGANIC STATUTES WHICH
ESTABLISH THE AGENCIES AND AUTHORIZE THEIR RULE MAKING WILL
BE THE MOST SIGNIFICANT LEGISLATIVE REGULATORY REFORM. FOREMOST
AMONG SUCH EFFORTS WILL BE OUR WORK ON THE CLEAN AIR ACT UNDER
THE LEADERSHIP OF THE DISTINGUISHED CHAIRMAN OF THE COMMITTEE
ON THE ENVIRONMENT AND PUBLIC WORKS (MR. STAFFORD).
THIS BILL IS FOCUSED ON THE INFORMAL RULE MAKING PROVISIONS
OF THE ADMINISTRATIVE PROCEDURE ACT AND ON RELATED MATTERS.
AS SUCH, THIS IS A PROCEDURAL MEASURE AND OCCUPIES ONLY A
DISCRETE AREA OF THE REGULATORY REFORM LANDSCAPE. CONSEQUENTLY,
THOUGH THE PROPOSALS IN THE BILL WILL GO FAR TO REMEDY SEVERAL
SERIOUS PROBLEMS IN THE REGULATORY PROCESS, THIS BILL IS ONLY
A FIRST STEP IN A BROAD REFORM MOVEMENT.
WHAT ARE THE SERIOUS PROBLEMS WE SEE IN THE REGULATORY
PROCESS? THE DATA DEVELOPED BY SCHOLARS AND OTHER EXPERTS AS
THEY EXAMINE THE PERFORMANCE OF AGENCIES OVER THE LAST DECADE
RAISES THE FUNDAMENTAL QUESTION OF WHETHER THE AGENCIES ARE
SATISFACTORILY FULFILLING THEIR MANDATE. INDEED, AS A 1978
-4-
WORKING PAPER OF THE YALE SCHOOL OF ORGANIZATION AND MANAGEMENT
CONCLUDED:
THE SOCIAL REGULATORY AGENCIES HAVE BEEN
HAVING THE SUBSTANTIAL EFFECT, BUT NOT
THAT DIRECTLY INTENDED IN THE LEGISLATION
ESTABLISHING THEIR MANDATE. THEY HAVE
ADDED TO COSTS OF PRODUCTION AND PRICES
TO CONSUMERS, WITHOUT SIGNIFICANTLY ADDING
TO THE HEALTH AND SAFETY OF PRODUCTION AND
CONSUMPTION.
SIMILARLY, ECONOMIST PAUL MACAVOY CRITICIZED THE OVERALL
PERFORMANCE OF FEDERAL AGENCIES IN A PAPER PRESENTED LAST
DECEMBER BEFORE THE AMERICAN ENTERPRISE INSTITUTE. AFTER
DESCRIBING THE COSTS OF REGULATION, MACAVOY OBSERVED:
ALTHOUGH NOT EASILY ACCOUNTED FOR IN
DOLLAR GROSS NATIONAL PRODUCT, THE QUALITY
OF WORKING CONDITIONS, PRODUCTS, AND THE
ENVIRONMENT COULD BE IMPROVED ENOUGH TO BE
"WORTH" THE HIGHER COSTS OF GOODS AND
SERVICES. IN FACT, SUCH BENEFITS AS
INTENDED BY LEGISLATION HAVE NOT BEEN
WIDELY ACHIEVED. WATER QUALITY HAS IMPROVED
IN CERTAIN RIVERS, AND HIGHWAY MORTALITY
RATES HAVE FALLEN PER MILLION PASSENGER
MILES, BUT EVEN IN THESE CASES OTHER
FACTORS BESIDES REGULATION PLAYED THE
COMMANDING ROLE IN IMPROVING CONDITIONS.
ON THE WHOLE, THE RESULTS FROM WIDESPREAD
USE OF RULES HAVE BEEN EXTREMELY LIMITED.
BY THE END OF THE 1970'S, THE CONTROL SYSTEM
HAD NOT BROUGHT ABOUT IMPROVEMENTS IN GENERAL
HEALTH, SAFETY, AND ENVIRONMENTAL QUALITY.
AS A FINAL EXAMPLE, TWO STUDIES FROM 1976, REVIEWING THE
OPERATION OF OSHA, RAISE THE QUESTION OF AGENCY EFFECTIVENESS.
IN HIS CRISIS IN THE WORKPLACE: OCCUPATIONAL DISEASE AND INJURY,
NICHOLAS ASHFORD CONCLUDED, "THE OSHA ACT HAS FAILED THUS FAR TO
LIVE UP TO ITS POTENTIAL FOR REDUCING JOB INJURY AND DISEASE
OSHA HAS HAD LITTLE MEASURABLE IMPACT IN REDUCING INJURIES AND
DEATHS." ROBERT SMITH, IN HIS MORE STATISTICAL STUDY, SIMILARLY
REPORTED THAT "THE ESTIMATED EFFECTS [OF OSHA] ON INJURIES ARE
-5-
SO SMALL THAT THEY CANNOT BE DISTINGUISHED FROM ZERO. "
LINKED TO THIS QUESTION OF AGENCY EFFECTIVENESS IS THAT OF
EXCESSIVE COMPLIANCE COSTS. SIMPLY PUT, IT APPEARS THAT THE
GROWING BODY OF FEDERAL REGULATIONS HAS BEEN ACCOMPANIED BY AN
IGNORANCE OF THE COMPLETE RANGE OF EFFECTS PRODUCED BY SUCH
REGULATION, AND THAT THIS IGNORANCE HAS OFTEN RESULTED IN
UNEXPECTED COSTS AND OTHER ADVERSE EFFECTS WHICH THREATEN TO
UNDERMINE THE SALUTORY GOALS TO BE ACHIEVED BY APPROPRIATE
REGULATION.
SEVERAL ESTIMATES OF THE AGGREGATE COMPLIANCE COSTS OF
FEDERAL REGULATIONS HAVE BEEN DEVELOPED. IN 1977, FOR EXAMPLE,
THE CHASE MANHATTAN BANK ESTIMATED THAT FEDERAL REGULATIONS
COST THE NATION'S ECONOMY MORE THAN $100 BILLION. THAT FIGURE
TRANSLATED TO $470 FOR EACH PERSON THEN LIVING IN THE UNITED
STATES, 5% OF THE G.N.P., 25% OF THE WHOLE FEDERAL BUDGET, AND
75% OF THE ANNUAL PRIVATE INVESTMENT IN PLANTS AND EQUIPMENT.
IN THE SAME YEAR, THE OFFICE OF MANAGEMENT AND BUDGET ESTIMATED
THE COST OF FEDERAL REGULATION TO BE $130 BILLION, OR $2,000
FOR EVERY AMERICAN FAMILY.
THE VERY MAGNITUDE OF SUCH SUMS IS SO BEYOND OUR COMMON
EXPERIENCE THAT THEIR TRUE IMPACT IS LOST ON US. BUT MAKE NO
MISTAKE -- THE IMPACT OF THESE COSTS IS NOT LOST ON THE HEALTH
OF THE ECONOMY OR ON THE LIVES OF THE AVERAGE AMERICAN. HOW DO
WE TRANSLATE THESE BARE FIGURES INTO MEANINGFUL FACTS? CERTAINLY,
FEDERAL REGULATION AGGRAVATES OUR ALREADY EXTREME RATE OF INFLATION
BY IMPOSING COSTS ON THE PRIVATE SECTOR WHICH RAISE PRICES WITHOUT
A CORRESPONDING RISE IN PRODUCTIVITY. INDEED, AS DR. JAMES
MILLER, HEAD OF OMB'S NEW OFFICE OF INFORMATION AND REGULATORY
-6-
AFFAIRS, HAS NOTED, "REGULATION OFTEN HAS A GREATER EFFECT
UPON CONSUMER WELFARE [THAN OTHER INFLATIONARY FACTORS] BECAUSE IT
OPERATES DIRECTLY UPON THE REAL SUPPLY OF GOODS AND SERVICES."
THE AMERICAN PUBLIC SPENDS APPROXIMATELY $60 BILLION
ON FEDERAL PAPERWORK, MEANING, ACCORDING TO OMB, THAT MEETING
FEDERAL PAPERWORK REQUIREMENTS TAKES A WORK FORCE LARGER THAN THE
WHOLE STEEL INDUSTRY. OF COURSE, IT IS EASY TO CRITICIZE
REGULATION WHEN WE FOCUS ON THE UNIVERSALLY ANNOYING MATTER
OF PAPERWORK. YET EVEN IN AREAS WHERE MOST WOULD RECOGNIZE
THE NEED FOR SOME GOVERNMENT ACTIVITY, THE FEDERAL REGULATORY
MACHINE HAS GONE TOO FAR, UNDERMINING THE GOALS THAT MACHINE WAS
DESIGNED TO ACHIEVE.
DUE TO FEDERAL REGULATIONS, FOR EXAMPLE, IT IS NOW ESTIMATED
TO TAKE $54 MILLION AND TEN YEARS TO BRING A NEW DRUG TO MARKET.
THIS RESTRAINT ON DRUG RESEARCH AND DEVELOPMENT PUT THE UNITED
STATES BEHIND OTHER, SUPPOSEDLY LESS DEVELOPED NATIONS IN
INTRODUCING NEW LIFE SAVING DRUGS. IN ADDITION, THIS REGULATION
WAS RESPONSIBLE FOR ABOUT ONE-THIRD OF THE INCREASE IN COSTS FOR
PHARMECEUTICALS BETWEEN 1960 AND 1975.
IN A MORE MUNDANE ARENA, FEDERALLY MANDATED SAFETY AND
ENVIRONMENTAL FEATURES INCREASED THE PRICE OF THE AVERAGE CAR
BY $666 IN 1978. SIMILARLY, IT WAS ESTIMATED THAT IN 1977 GOVERN-
MENT REGULATIONS ADDED BETWEEN $1,500 AND $2,500 TO THE COST OF
A NEW HOUSE.
YET THE BROAD AND SERIOUS CONSEQUENCES OF OUR REGULATORY
POLICIES CANNOT BE ACCURATELY EXPRESSED BY ONE SET OF NUMBERS.
EXAMINE THE IMPACT OF REGULATORY COMPLIANCE COSTS ON ENERGY
PRODUCTION AND PRICES. ONE ILLUSTRATIVE STUDY BY THE COLORADO-
UTE ELECTRIC ASSOCIATION SHOWED THAT FOR THE TWELVE MONTH
PERIOD ENDING ON JUNE 30, 1978, THE COST OF COMPLYING WITH
FEDERAL REGULATION FOR ALL COLORADO-UTE'S STEAM GENERATING
STATIONS WAS 34.6% OF THE TOTAL PRODUCTION COSTS FOR THOSE
STATIONS. AND COLORADO-UTE'S EXPERIENCE IS REPEATED ALL ACROSS
THE COUNTRY.
SUCH COSTS ARE OBVIOUSLY PASSED ON TO THE CONSUMER IN
HIGHER ENERGY PRICES, WITH SERIOUS RESULTS. AS A JUNE 1980 REPORT
OF DOE OBSERVED:
THE IMMEDIATE EFFECT OF RISING ENERGY COSTS
HAS BEEN A LOSS OF INCOME TO PURCHASE THE OTHER
NECESSITIES OF LIFE--SHELTER, FOOD, HEALTH CARE--
THE COSTS OF WHICH HAVE ALSO RISEN SHARPLY. THE
CONTINUED ESCALATION OF HOME ENERGY COSTS HAS HAD
A DRAMATIC IMPACT ON THE GENERAL PURCHASING
POWER OF THE POOR
THUS, FOR THE PERIOD 1978-1980
NEARLY $14 BILLION HAS BEEN TAKEN FROM THE
POCKETS OF THE MOST ECONOMICALLY DISADVANTAGED
SEGMENT OF OUR SOCIETY DUE SOLELY TO INCREASED
ENERGY PRICES.
THIS REPORT GOES ON TO CONCLUDE THAT CONTINUING COST INCREASES
"COULD JEOPARDIZE THE HEALTH AND SAFETY OF THE POOR AND ELDERLY
OF OUR NATION."
YET, MR. PRESIDENT, IN TRACKING DOWN THE PERVASIVE EFFECTS
OF REGULATION WE CANNOT STOP AT SUCH QUANTIFIABLE COSTS, FOR WHAT
ARE TERMED THE "INDUCED" EFFECTS OF REGULATION HAVE SERIOUS
IMPLICATIONS FOR THE FUTURE WELL-BEING OF THIS COUNTRY. IN HIS
COSTS OF REGULATION AND BENEFITS OF REFORM, DR. MURRAY WEIDENBAUM,
CHAIRMAN OF THE COUNCIL OF ECONOMIC ADVISORS, DISCUSSES THESE
INDUCED EFFECTS, SUCH AS THE REDUCED RATE OF NEW PRODUCT INTRO-
DUCTION DUE TO THE INCREASED USE OF PRIVATE RESEARCH AND
DEVELOPMENT BUDGETS TO MEET REGULATORY REQUIREMENTS. LIKEWISE,
THE DIVERSION OF FUNDS FROM NEW CAPITAL INVESTMENT TO COMPLIANCE
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WITH GOVERNMENT-MANDATED SOCIAL REQUIREMENTS HAS A SIGNIFICANT
IMPACT ON PRODUCTIVITY. FOR EXAMPLE, EDWARD DENISON OF THE
DEPARTMENT OF COMMERCE ESTIMATED THE LOSS OF PRODUCTIVITY DUE
TO INVESTMENTS IN ENVIRONMENTAL AND JOB SAFETY REQUIREMENTS AT
ABOUT ONE-FOURTH OF THE POTENTIAL AVERAGE ANNUAL INCREASE IN
PRODUCTIVITY.
ALL THIS IS NOT EVEN TO BEGIN TO ADDRESS THE EFFECTS OF
GOVERNMENT REGULATION ON THE BASIC ENTREPRENEURIAL NATURE OF THE
PRIVATE ENTERPRISE SYSTEM. IN THE WORDS OF DR. WEIDENBAUM,
THE ULTIMATE COSTS OF EXCESSIVE GOVERNMENT
INVOLVEMENT IN THE ECONOMY ARE NOT ALWAYS
VISIBLE BUT SURELY ARE POWERFUL--THE
FACTORIES THAT ARE NOT BUILT, THE JOBS
THAT ARE NOT CREATED, THE GOODS AND
SERVICES THAT ARE NOT PRODUCED, AND THE
INCOMES THAT ARE NOT GENERATED. THESE
EFFECTS HAVE FORMIDABLE IMPACT ON OUR
STANDARD OF LIVING AND OUR QUALITY OF LIFE.
ON TOP OF ALL THESE CONCERNS, WE, AS GOVERNMENT OFFICIALS,
MUST APPRECIATE THE EFFECT OF REGULATION ON THE CONFIDENCE
AMERICAN CITIZENS PLACE IN THEIR GOVERNMENT AND ON THE RESPECT
WHICH THEY ACCORD TO IT. OVER 2.2 MILLION PEOPLE RESPONDED TO
A RECENT QUESTIONNAIRE DEVELOPED BY THE CONGRESSIONAL RESEARCH
SERVICE ON ATTITUDES TOWARD FEDERAL REGULATION. EIGHTY-TWO
PERCENT FELT THAT FEDERAL REGULATIONS WERE NOT FAIR TO THE
PEOPLE AFFECTED BY THEM. OVER NINETY-FOUR PERCENT AGREED
THAT PRODUCTS "COST MORE" BECAUSE OF FEDERAL REGULATIONS.
NINETY-FIVE PERCENT FELT THAT MOST FEDERAL REGULATIONS ARE
"COMPLICATED AND CONFUSING" AND OVER SEVENTY-FIVE PERCENT
BELIEVED THAT THE COST OF DEVELOPING AND ENFORCING FEDERAL
REGULATIONS WAS "SELDOM" JUSTIFIED. FINALLY, EIGHTY-TWO PERCENT
OF THOSE RESPONDING WERE NOT CONFIDENT THAT WHEN NEW
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REGULATIONS WERE ISSUED THEY WERE BASED ON PROVEN FACT.
THE "ROAD TO REFORM"
so WHAT ARE WE, AS THE FUNDAMENTAL POLICY MAKERS OF THIS
NATION, TO DO? I WOULD FIRST OBSERVE THAT MY DISCUSSION OF THE
INEFFECTIVENESS AND COSTS OF FEDERAL REGULATION IS NOT BY ANY
MEANS AN INDICTMENT OF ALL GOVERNMENT INVOLVEMENT IN THE "PRIVATE"
SECTOR NOR DOES IT IMPUGN THE REAL BENEFITS ACHIEVED BY APPROPRIATE
REGULATION. YET FOR OVER A DECADE PUBLIC DEBATE HAS FOCUSED ON
THE PUTATIVE BENEFITS OF REGULATION. AS THE PRICE TAG FOR THE
POLICIES OF THE PAST COMES DUE, WE MUST ASK WHETHER THE AMERICAN
PEOPLE HAVE BEEN WELL-SERVED BY THOSE POLICIES. MERELY
HAULING OUT SLOGANS TO BERATE AND INTIMIDATE THOSE ENGAGED
IN PUBLIC DISCOURSE ON THIS MATTER ONLY FORCES OUR PUBLIC POLICY
TO ACT AS IF EXISTENCE ON THIS PLANET IS NOT ENCUMBERED BY SCARCE
RESOURCES, BUT DOES NOT CHANGE THAT CRUEL FACT. THE SOCIAL
GOALS OF OUR POLICIES CAN ONLY BE UNDERMINED BY A FAILURE TO USE
OUR RESOURCES WISELY.
THIS CATALOG OF WOES DOES REMIND US THAT REGULATION BY
ADMINISTRATIVE AGENCY IS NOT THE ONLY, OR EVEN THE UNIVERSALLY
PREFERRED MECHANISM OF GOVERNMENT INVOLVEMENT IN THE PRIVATE
SECTOR. THAT FUNDAMENTAL POLICY MATTER IS BEYOND THE COMPETENCE
OF THE SUBCOMMITTEE ON REGULATORY REFORM, BUT MUST BE ADDRESSED
BY OTHER BODIES OF THE SENATE WHEN WE CONSIDER CHANGES TO
VARIOUS ORGANIC STATUTES.
YET THESE OBSERVATIONS OF THE PERFORMANCE OF OUR REGULATORY
SYSTEM DO SUGGEST SOME CRITICAL WEAKNESSES IN THAT SYSTEM. AS
FRED THOMPSON AND LARRY JONES, WRITING IN THE WINTER 1980 NUMBER
OF THE CALIFORNIA MANAGEMENT REVIEW, NOTED:
-10-
IT IS LIKELY THAT FEDERAL REGULATORY
DECISIONS ARE WORSE, PERHAPS MUCH WORSE,
THAN OTHER KINDS OF GOVERNMENT DECISIONS.
THIS IS BECAUSE THE COST OF REGULATION IS
A COST OF GOVERNMENT, BUT IT IS NOT TREATED AS
A COST TO GOVERNMENT. CONSEQUENTLY, THE
INTERNAL CHECKS THAT WORK TO PROMOTE EFFICIENCY
AND EFFECTIVENESS IN GOVERNMENT ARE NOT FULLY
OPERATIVE WHERE REGULATION IS CONCERNED;
IN SOME CASES, THEY MAY EXACERBATE THE PROBLEM.
I BELIEVE THAT THE BASIC POLICY WE MUST EMBRACE IS CLEAR. I
CAN FIND NO BETTER ARTICULATION OF THAT POLICY THAN THE WORDS OF OUR
COLLEAGUE, THE DISTINGUISHED SENATOR FROM TEXAS (MR. BENTSEN),
WRITING AS CHAIRMAN OF THE JOINT ECONOMIC COMMITTEE IN A JUNE 1980
STAFF STUDY PUBLISHED BY THAT COMMITTEE. AS THE SENATOR LUCIDLY
OBSERVED:
GOVERNMENT REGULATION FOR TOO LONG HAS BEEN
CAST IN A PURELY SOCIAL ROLE AS THOUGH IT SHOULD
BE QUARANTINED FROM ECONOMIC SCRUTINY. NO PART
OF THE AMERICAN EXPERIENCE CAN BE AFFORDED THAT
LUXURY OF DISREGARDING OTHER CRUCIAL ELEMENTS
OF THIS NATION'S QUALITY OF LIFE.
REGULATION CANNOT ABIDE APART FROM ALL
OTHER CONSIDERATION; IT MUST BE A PART OF
THE OVERALL STRATEGY TO IMPROVE LIVING
STANDARDS. LEFT AS A DETACHED FEATURE OF
GOVERNMENT, THE REGULATORY NETWORK SMOTHERS
ECONOMIC OPPORTUNITY.
TO PROPERLY EVALUATE ITS TOTAL IMPACT,
GOVERNMENT REGULATION MUST BE VIEWED AS BOTH
A SOCIAL AND ECONOMIC ISSUE; SOCIAL BECAUSE
MOST REGULATION WAS DESIGNED TO BRING ABOUT
CLEANER AIR AND WATER, SAFER JOBS, AND AN
IMPROVED QUALITY OF LIFE; ECONOMIC BECAUSE
THESE SOCIAL AMIBITONS COMMAND HUGE AND
PREVIOUSLY UNCOUNTED AMOUNTS OF THE NATION'S
RESOURCES.
THE "REGULATORY REFORM ACT" EMBODIES THIS POLICY. ITS PRO-
VISIONS ARE DESIGNED TO CONSTRUCT WITHIN THE REGULATORY PROCESS A
MECHANISM BY WHICH REGULATORS WILL RATIONALLY EVALUATE ALL ASPECTS
OF A PROPOSED REGULATION. THIS LEGISLATION IS INFORMED BY
A CONCLUSION AKIN TO THAT MADE BY ROBERT CRANDALL, A SENIOR FELLOW
AT THE BROOKINGS INSTITUTION, WRITING IN THE WINTER 1979 NUMBER
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THE BROOKINGS BULLETIN:
THE SINGLE MOST IMPORTANT PROBLEM THAT
PERVADES HEALTH, SAFETY, AND ENVIRONMENTAL
REGULATION IS THE ABSENCE OF A MECHANISM TO
COMPEL THE REGULATORS TO EXAMINE THE ECONOMIC
TRADEOFFS AMONG DIFFERENT WAYS OF ACHIEVING
A GIVEN REGULATORY GOAL
SINCE FEW CITIZENS CAN POSSIBLY KNOW HOW
MUCH ALTERNATIVE POLICIES WILL COST THEM IN
TERMS OF REDUCED RESOURCES FOR BUYING FOOD,
SHELTER, OR MEDICAL CARE, THE DECISION THAT
WOULD MINIMIZE THE ECONOMIC COST OF SOCIAL
REGULATION IS SELDOM THE ONE THAT APPEARS
POLITICALLY MOST PRUDENT TO THE AGENCY
ADMINISTRATOR. HE OFTEN ENDS UP CHOOSING
A NEEDLESSLY EXPENSIVE REGULATION OR A
VERY TIGHT STANDARD THAT COULD NOT BE
JUSTIFIED BY ITS BENEFITS AND COSTS. ONLY
BY CHANGING THE INCENTIVES FACING AN ADMINISTRATOR,
OR BY INFORMING THE ELECTORATE OF HIS PROFLIGACY,
CAN MORE SENSIBLE REGULATION BE ACHIEVED.
MR. PRESIDENT, AT THIS TIME I WILL NOT DETAIL ALL OF THE
PROVISIONS OF THIS BILL. IN ESSENCE, IT MANDATES A PROCEDURE,
AS PART OF THE RULE MAKING PROCESS, WHICH WOULD REQUIRE AGENCIES
TO IDENTIFY AND EVALUATE THE TRADEOFFS INHERENT IN ANY REGULATION.
THIS SORT OF ANALYSIS HAS ITS ANTECEDENT IN AN EXECUTIVE ORDER
FIRST PROMULGATED IN THE FORD AMINISTRATION REQUIRING AGENCIES
TO PUBLISH AN "INFLATION IMPACT STATEMENT" WITH EACH NEW
REGULATION. PRESIDENT REAGAN'S RECENT EXECUTIVE ORDER 12291,
MANDATING A "REGULATORY IMPACT ANALYSIS" FOR. REGULATIONS, IS
THE MOST CURRENT ADMINISTRATIVE EXPRESSION OF THIS DEVICE. TO
A GREAT DEGREE THIS LEGISLATION CODIFIES AND GIVES UNIFORM
APPLICATION TO THE POLICIES EMBODIED IN EXECUTIVE ORDER 12291.
FURTHERMORE, BY ENACTING THIS PROCEDURE IN A STATUTE, WE
ENSURE AGENCY COMPLIANCE TO AN EXTENT NOT ACHIEVED BY EXECUTIVE
FIAT.
THE KEY TO THIS BILL IS THE REQUIREMENT THAT AGENCIES DESCRIBE
AND ANALYZE THE BENEFITS, COSTS, AND OTHER ADVERSE EFFECTS OF
EACH NEW REGULATION. IN SPITE OF THE USE OF THE WORDS "BENEFITS"
AND "COSTS," IT IS IMPORTANT TO NOTE THAT THIS REQUIREMENT IS NOT
IN ANY SENSE A "STRICT COST-BENEFIT ANALYSIS." THESE PROVISIONS
HAVE TRADITIONALLY BEEN TERMED A "REGULATORY ANALYSIS" BECAUSE,
UNLIKE "COST-BENEFIT ANALYSIS," THEY DO NOT REQUIRE AGENCIES TO
QUANTIFY EVERY EFFECT OF REGULATION. RATHER, AN AGENCY IS
REQUIRED TO IDENTIFY AS PRECISELY AS POSSIBLE THE BROAD RANGE OF
EFFECTS OF A REGULATION, INCLUDING THOSE WHICH CANNOT BE
DESCRIBED IN NUMBERS. THUS, THIS PROVISION RECOGNIZES THAT MANY
OF THE THINGS WE HOLD MOST DEAR, AND SEEK TO PROTECT BY FEDERAL
REGULATION, ARE NOT READILY SUSCEPTIBLE TO EXPRESSION IN QUANTATIVE
TERMS.
CERTAINLY, IDENTIFYING THE LIKELY EFFECTS OF A REGULATION
IS A DIFFICULT EXERCISE. YET AS PROFESSOR WILLIAM RODGERS WRITES
IN A RECENT ISSUE OF THE HARVARD ENVIRONMENTAL LAW REVIEW,
"DESPITE THESE DIFFICULTIES, IDENTIFICATION AND CLASSIFICATION
OF THE EXPECTED EFFECTS IF A USEFUL EXERCISE, AND ARGUABLY
ESSENTIAL TO RATIONAL DECISION MAKING."
REGULATORY ANALYSIS IS NOT EASY, IT IS TRUE; BUT THE
ALTERNATIVE IS FOR REGULATORY DECISIONS TO BE MADE IN SECRET OR
IN IGNORANCE. THESE ANALYTICAL REQUIREMENTS ARE A RESPONSE TO A
COMMON CRITICISM OF THE REGULATORY PROCESS, SUCH AS THAT RECENTLY
VOICED BY DR. LESTER LAVE OF THE BROOKINGS INSTITUTION:
"INDEED, REGULATORY DECISIONS HAVE BEEN TREATED FAR TOO CASUALLY
TO DATE, WITH GUESSES BEING SUBSTITUTED FOR OBSERVABLE FACTS
AND LITIGATION BEING USED TOO OFTEN AS A DEVICE FOR DELAY OR
THE FORUM FOR CLARIFYING SCIENTIFIC ISSUES."
YET SAYING THIS IS NOT TO CLAIM THAT REGULATORY ANALYSIS
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WILL REMOVE ALL UNCERTAINTY FROM THE REGULATORY PROCESS. MANY
REGULATORY DECISIONS IN ESSENCE MUST BE BASED ON THE PERSONAL
STANDARDS OF RISK AVERSION OF THE DECISION MAKERS. BUT
AGENCIES ARE DESIGNED, AND THIS ANALYSIS AIMS, TO ENSURE THAT THE
PUBLIC POLICIES PROMULGATED IN REGULATIONS ARE BASED ON
GENUINELY EXPERT AND UNBIASED JUDGMENTS FAIRLY RENDERED IN A
PUBLIC PROCESS. AGAIN QUOTING DR. LAVE:
ALL OF THE UNCERTAINTY MUST BE DESCRIBED AND
DISPLAYED IN THE FINAL ESTIMATES OF RISK. BY DOING
THIS, DECISION MAKERS CAN DECIDE HOW PRUDENT THEY
WOULD LIKE TO BE. FURTHERMORE, THIS PROCEDURE
IDENTIFIES THE MOST IMPORTANT UNCERTAINTIES, PRO-
VIDING A FOCUS FOR FUTURE RESEARCH AND INDICATING
HOW NEW RESULTS CAN BE INTEGRATED INTO EXISTING
EVIDENCE.
IN ADDITION TO THE TECHNICAL BENEFITS TO BE GAINED BY SUCH
ANALYSIS, IT IS VITALLY IMPORTANT THAT REGULATION MAKING, WHICH
IS LAW MAKING WITH THE SAME PRACTICAL EFFECT AS THE LEGISLATING
DONE BY CONGRESS, BE A SUBJECT OF PUBLIC SCRUTINY. REGARDLESS
OF HOW WELL-MEANING THEY MAY BE, AGENCY BUREAUCRATS ARE UNELECTED
OFFICIALS. THOUGH THEORETICALLY THEY ARE ACCOUNTABLE TO THE
CONGRESS, AND THROUGH CONGRESS TO THE AMERICAN PEOPLE, THE MORE
DIRECT PUBLIC ACCOUNTABILITY WHICH WOULD RESULT FROM THE PROCEDURES
OF THIS BILL IS APPROPRIATE IN REPUBLICAN GOVERNMENT, AND SERVES TO
INCREASE CONFIDENCE OF ALL CITIZENS IN THEIR GOVERNMENT.
THE REGULATORY ANALYSIS REQUIRED BY THIS BILL PROVIDES FOR
THE FULL PARTICIPATION OF INTERESTED MEMBERS OF THE PUBLIC IN
BOTH IDENTIFYING THE EFFECTS OF A PROPOSED REGULATION AND IN
FORMULATING ALTERNATIVES TO IT. BASED ON THE INFORMATION GATHERED
IN THIS PROCESS, AND AS PART OF THE WHOLE RULE MAKING, THE AGENCY
MUST PUBLISH WITH THE FINAL RULE ITS DETERMINATION THAT THE BENEFITS
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OF THE RULE WILL JUSTIFY ITS COSTS, AND THAT, OF ALL THE ALTER-
NATIVES CONSIDERED DURING THE RULE MAKING, THE RULE IS THE MOST
COST-EFFECTIVE MEANS OF ACHIEVING THE REGULATORY OBJECTIVES.
THIS DETERMINATION IS AN IMPORTANT PART, BUT ONLY ONE PART, OF THE
PROCESS OF RULE MAKING CONTEMPLATED UNDER THIS BILL. THE
INFORMATION PUBLISHED DURING THE RULE MAKING ILLUMINATES THE
PROBLEMS WHICH CONFRONT AN AGENCY IN REGULATING AND THE PROCESSES
BY WHICH IT GOES ABOUT TO RESOLVE THOSE PROBLEMS.
THE WORD "JUSTIFY" WAS CHOSEN TO PRESERVE A CERTAIN
FLEXIBILITY FOR AGENCY DECISION MAKING AND TO ENSURE THAT THE
JUDGMENT OF THE AGENCY COULD EMBRACE THE BROAD VARIETY OF
ELEMENTS INHERENT IN ANY REGULATORY DECISION. BY THE SAME TOKEN,
THE AGENCY'S DETERMINATION CONCERNING THE RELATIONSHIPS OF
THE EFFECTS OF REGULATION IS TO BE BASED ON THE REASONABLE
JUDGMENT OF THE AGENCY. THIS FORMULATION IS AKIN TO THE VERY
FAMILIAR "REASONABLE MAN" STANDARD IN TORT LAW APPLIED BY THE
COURTS TO DETERMINE IF A PERSON HAS ACTED NEGLIGENTLY. THUS,
IN EVALUATING AN AGENCY DETERMINATION UNDER THE PROVISIONS OF
THIS BILL, ONE WOULD ASK: WOULD A REASONABLE PERSON LOOKING AT
?
THE RECORD BEFORE THE AGENCY AGREE WITH THE AGENCY THAT THE
BENEFITS OF A PROPOSED REGULATION WERE WORTH ITS COSTS?
CERTAINLY, THIS PROVISION IS HARDLY A DRACONIAN BURDEN
ON AGENCIES. THE WEIGHING OF TRADEOFFS IS A PROCESS WHICH ANY
RATIONAL PERSON, WHETHER AN INDIVIDUAL OR A BUSINESS, GOES THROUGH
TO CHOOSE BETWEEN ALTERNATIVE COURSES OF ACTION. UNLESS ONE
WOULD SAY THAT ALL AGENCIES BEHAVE IRRATIONALLY, FEDERAL AGENCIES
AT PRESENT IMPLICITLY IDENTIFY AND ASSESS AT LEAST SOME OF THE
EFFECTS OF PROPOSED REGULATIONS. PARAPHRASING THE TESTIMONY
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OF DR. MILLER BEFORE THE HOUSE DURING THE LAST CONGRESS, THE
IMPORTANT THING TO BEAR IN MIND IS THAT AGENCIES ONE WAY OR
ANOTHER MUST MAKE DECISIONS. THE QUESTION IS WHETHER THE ANALYSIS
PROPOSED IN THIS BILL CAN BE USED TO IMPROVE THE QUALITY OF THOSE
DECISIONS. INFORMATION IS NEVER PERFECT, BUT THIS IS NOT TO
SAY THAT LESS INFORMATION IF PREFERABLE TO MORE.
MR. PRESIDENT, I AM CONVINCED THAT THE PROCEDURES SET OUT
IN THIS LEGISLATION WILL HELP AGENCIES TO MORE EFFECTIVELY USE
OUR NATIONAL RESOURCES TO SATISFY THEIR STATUTORY MANDATES AND
THEREBY DECREASE THE EXCESSIVE REGULATORY BURDENS WHICH CONSTRAIN
OUR ECONOMIC PRODUCTIVITY. ROUGHLY BORROWING A COMMENT MADE BY
A PRIVATE ATTORNEY, EXPERT IN ADMINISTRATIVE LAW, I WOULD CONCLUDE
THAT RULES FORMULATED THROUGH THE PROCEDURES OF THIS LEGISLATION
WILL BE BASED ON SOUNDER REASONING, SUSTAINED BY ECONOMIC
ANALYSIS, WELL VENTILATED BEFORE THE PUBLIC, AND THUS LESS
VULNERABLE OVER THE LONG-RUN TO THE CHANGING WHIMS OF POLITICAL
EXPEDIENCY.
MR. PRESIDENT, I ASK UNANIMOUS CONSENT THAT THE SUMMARY
OF THE PROVISIONS OF THIS BILL AND THE FULL TEXT OF THIS BILL
APPEAR IN THE RECORD IMMEDIATELY FOLLOWING THESE REMARKS.
Summary of The Regulatory Reform Act
Introduction
The "Regulatory Reform Act of 1981" contains a series of
amendments to certain provisions of the Administrative Procedure
Act. This legislation is not intended to be a comprehensive
"regulatory reform" bill, but is focused on the procedures for
rule making and for judicial review of agency actions. It is
expected that legislation addressing such areas as agency
adjudication, agency subpoena power, and the role of adminis-
trative law judges will be developed for future consideration.
Overview
In brief, the major changes to the A.P.A. proposed in
this bill--
require agencies to evaluate on a non-mathematical basis
the trade-offs of "major rules" and to determine that
such rules are worth their costs and are cost-effective;
allow oral presentations in major rule makings, including
cross-examination where needed to resolve factual issues;
require agencies to review major rules every ten years
to determine if they should be revised or withdrawn;
prohibit the courts from presuming that agency
interpretations of law are valid and require
agency factual determinations in rule making
to have substantial support;
address the "race-to-the-courthouse" problem in review
of agency action by assigning a case randomly where
review proceedings have been instituted in different
courts within ten days of each other; and
require agencies to publish a semi-annual agenda of
regulatory actions.
Rule Making Provisions
Sections 2 and 3 of the bill amend the definitions and the
"informal rule making" provisions of the A.P.A. (5 U.S.C. §§551,
553). The major amendments are:
A "major rule" is defined as a rule, or a series of related
Miller w/d
confine to this.
rules, which will impose compliance costs of $100 million,
which will substantially increase prices or costs for
wage earners, consumers, etc., or which will have sig-
nificant adverse effects on employment, productivity, etc.
(Bill pp. 2-3)
"Benefit" and "cost" are defined to mean significant
benefits and costs, including direct and indirect social
benefits and costs. (Bill p. 3)
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In the notice of proposed rule making an agency must include:
-- a statement of the objectives of the rule,
-- a description of the substantive material on which
the rule is based, and
-- a solicitation of proposals for alternatives to
the rule. (Bill pp. 3-4)
For a major rule making, the notice shall also include:
-- a description of the quantifiable and nonquantifiable
benefits and costs of the proposed major rule;
a description of alternatives to the rule; and
-- except where another statute directs otherwise,
an explanation of how the agency expects the benefits
of the rule to justify its costs and why the rule is
more cost-effective than the alternatives. (Bill pp. 5-6)
(Agency evaluations of the effects of a major rule are
explicitly not required to be done mathematically. ) (Bill p. 6)
Interested persons are given sixty days to submit written
comments on the proposed rule. For a major rule making,
interested persons are also. given an opportunity to make
oral presentations. This may include cross-examination
if requested to resolve a material issue of fact and if
other procedures are inadequate to resolve such issue.
(Bill pp. 6-7)
In promulgating the final rule, the "statement of basis
and purpose" must include:
-- a statement of the objectives of the rule;
-- a description of alternatives considered and the
reasons for their rejection;
-- a legal memorandum showing that the rule is within
the authority of the agency;
-- an explanation of the agency's factual conclusions; and
-- a description of the material on which the rule is
based. (Bill p. 8)
For a major rule, the statement of basis and purpose
also includes:
-- a description and comparison of the benefits and
costs of the rule; and
-- except where another statute directs otherwise,
the agency's determination that the benefits of the
rule justify its costs, and that the rule is more
-3-
cost-effective than the alternatives considered.
(Bill pp. 8-9)
The analysis of the effects of a major rule cannot be
contracted outside of the agency. However, data gathering
can be contracted if the source is identified. (Bill p. 9)
A file of the rule making, which is the record for review,
must be maintained. The file includes the notice of proposed
rule making, the statement of basis and purpose, and other
documents of the rule making. (Bill pp. 9-10)
Judicial review of the agency's descriptions and analyses
of the effects of the rule and of the use of cross-exam-
ination is limited. A rule can be set aside only if an
error in these areas violates three of the present
standards for review (i.e., such error renders the rule
"arbitrary;" such error violates a constitutional right;
or such error amounts to the agency exceeding its
statutory jurisdiction). (Bill pp. 10-11)
Regulatory Review Provisions
Section 4 of the bill adds a new section to the A.P.A. requiring
agencies to review major rules every ten years. The major features
of Section 4 are:
One year after the effective date of this section, each
agency must publish a schedule for review of existing major
rules within a ten-year period. (Bill pp. 12-13)
New major rules must be reviewed within ten years of
their effective date. Amended major rules and major rules
which have been reviewed must be reviewed ten years after
their amendment or review. (Bill p. 13)
The review is initiated by a notice which explains the
proposed agency action, assesses the effects of the
rule while it was in operation, determines if the rule
is still a major rule, and invites suggestions for improvements
in the rule. (Bill pp. 13-14)
Pursuant to the review, the agency amends, rescinds, or
renews the rule.
-- If the agency plans to amend or rescind the rule, the
normal rule making procedures apply, (5 U.S.C § 553.)
-- If the agency plans to renew the rule without change,
if must allow sixty days for public comment and
publish the renewed rule with a determination that the
rule continues to comply with the rule making provisions
(5 U.S.C. § 553). (Bill p. 14)
If it is impracticable for the agency to review a
rule within ten years, the President or his designee
may grant an extension for up to an additional 5 years.
(Bill p. 15)
-4-
If an agency fails to review a rule within the prescribed
period, it must immediately publish a notice proposing to
withdraw or renew the rule and complete rule making
proceedings within 180 days. (Bill p. 15)
Judicial Review Provisions
Section 5 of the bill makes two major changes in the A.P.A.
provision outlining the scope of judicial review of agency actions.
They are:
A court is prohibited from presuming that agency inter-
pretations of law are valid. No burden of proof is
shifted. (Bill p. 17)
Agency factual determinations made during informal rule
making must have substantial support in the rule making
record. (Bill p. 16)
Venue ("Race-to-the-Courthouse") Provisions
Section 6 of the bill amends the venue provisions of the
U:S. Code to deal with the so-called "race-to-the-courthouse"
problem. Title 28 U.S.C. $2112 provides that when proceedings
to review an agency order have been filed in two or more courts
of appeals, the agency must file the record for review in the
court where such proceedings were first filed. Though the filing
of the record is not legally determinative of where venue
lies, as a practical matter proceedings are rarely transferred
from the court where the record has been filed.
Thus, parties often "race" to file a review proceeding
in what they consider to be a favorable court. This bill
essentially adopts a proposal of the Administrative Conference
of the U.S. to randomly select a court when review proceedings
have been instituted in two or more courts of appeals within
ten days of each other. (Bill pp. 17-18) -
Regulatory Agenda and Calendar Provisions
Section 7 of the bill adds a new section to the A.P.A.
requiring agencies to publish an agenda of regulatory actions they
expect to take.
Each agency must publish an agenda in April and October
of rules that the agency will be acting on during the
following twelve months. (Bill p. 18-19)
In May and November, the President or his designee must
publish a calendar of major rules on which agencies will
be acting in the following twelve months. (Bill p. 19)
An agency may propose a major rule that was not included in
an agenda if it publishes an explanation for the ommission.
(Bill p. 19)
The provisions of this section are not subject to judicial
review. (Bill p. 19)
97th
CONGRESS
(NorE.-Fill in all Park lines except
those provided for the date, num-
1st SESSION
S.
Same ber. and reference of bill.)
IN THE SENATE OF THE UNITED STATES
Mr. Laxalt (for himself, Mr. Leahy, Mr. Thurmond, Mr. Roth, Mr. Biden, Mr. Eagleton, Mr.
Robert C. Byrd, Mr. Bentsen, Mr. Mathias, Mr. Hatch, Mr. Dole, Mr. Simpson, Mr. East,
Mr. Grassley, Mr. Denton, Mr. Specter, Mr. Percy, Mr. Stevens, Mr. Durenberger, Mr.
Mattingly, Mr. Kennedy, Mr. Metzenbaum, Mr. DeConcini, Mr. Baucus, Mr. Heflin, Mr. Chiles,
Mr. Nunn, Mr. Sasser, Mr. Fryor, Mr. Levin, Mr. Schmitt, Mr. Helms, Mr. Tower, Mr.
Hatfield, Mr. Domenici, Mr. Weicker, Mr. Garn, Mr. Bumpers, Mr. Harry F. Byrd, Jr., Mr.
Huddleston, Mr. Dodd, Mr. Goldwater, Mr. Lugar, Mr. Cochran, Mr. Jepsen, Mr. Kasten,
Mr. Humphrey, Mrs. Kassebaum, Mr. Burdick, Mr. Hollings, Mr. Pell, Mr. Armstrong, Mr.
Pressler, Mr. Wallop, Mr. Abdnor, Mr. D'Amato, Mr. Andrews, Mr. Symms, Mrs. Hawkins, Mr.
Quayle, Mr. Hayakawa, Mr. Ford, Mr. Riegle, Mr. Dixon, Mr. Mitchell, Mr. Zorinsky, Mr.
Johnston, Mr. Boren, Mr. Boschwitz, Mr. Heinz, Mr. Inouye, Mr. Nickles, and Mr. Matsunaga.)
introduced the following bill; which was read twice and referred jointly, by
unanimous consent, to the Committees on the Judiciary and Governmental Affairs, with
instructions that after one Committee orders the bill reported, the other shall have
30 days in which to report or be deemed discharged from further consideration.
A BILL
To amend the Administrative Procedure Act to require federal
agencies to analyze the effects of rules to improve their
effectiveness and to decrease their compliance costs; to
provide for a periodic review of regulations; and for other
purposes.
(Insert title of bill here)
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled,
Section 1. This Act may be cited as the "Regulatory Reform Act. "
RULEMAKING PROCEDURES
Section 2. Section 551 of title 5, United States Code, is
amended by adding at the end thereof the following new paragraphs:
-2-
" (15) 'emergency rule' means a rule that may be temporarily
effective according to the provisions of subsection (b) of
section 553 of this title without prior compliance with the
provisions of subsections (c) through (g) of section 553 if
the agency finds that a delay in the effective date of the
rule would--
" (A) seriously injure an important public interest; or
" (B) seriously damage a person or class of persons
without serving any important public interest;
" (16) 'major rule' --
" (A) means a rule or a series of closely related rules
that causes or is likely to cause--
" (i) an annual effect on the economy of $100,000,000
or more in direct and indirect enforcement and compliance costs;
" (ii) a substantial increase in costs or prices
for wage earners, consumers, individual industries, Federal,
State or local government agencies, or geographic regions; or
" (iii) significant adverse effects on competition,
employment, investment, productivity, innovation, or
the ability of enterprises whose principal places of
business are in the United States to compete in domestic
or export markets;
" (B) but does not mean --
"
(i) a rule of particular applicability that approves or pre-
scribes for the future rates, wages, prices, services or allowances
therefor, corporate or financial structures or reorganizations thereo:
or accounting practices bearing on any of the foregoing, or a rule
that involves the internal revenue laws of the United States;
"(ii) a rule that authorizes the introduction into commerce
or recognizes the marketable status of a product or service that,
pursuant to statute, could not lawfully be introduced into commerce
-3-
or marketed in the absence of the rule; or
"(iii) a rule that relates to the property or contracts of
the Tennessee Valley Authority;
" (17) 'cost' or 'costs' meanspotential significant costs, including
direct and indirect social costs and effects;
" (18) 'benefit' or 'benefits' means potential significant benefits,
including direct and indirect social benefits and effects. "
Section 3. Section 553 of title 5, United States Code, is amended
to read as follows:
" (a) This section applies to every rule making except as provided
in subsection (b).
" (b) (1) This section does not apply, except when notice or hearing
is otherwise required by statute, to any--
" (A) rule to the extent that such rule involves a military
or foreign affairs function of the United States;
" (B) rule relating exclusively to internal personnel rules and
personnel practices of an agency;
" (C) interpretive rule, general statement of policy, or rule
of agency organization, procedure, or practice, other than an
interpretive rule or general statement of policy that has
general applicability and would have a substantial impact on the
substantive rights or obligations of persons outside the agency;
" (D) rule for which the agency for good cause finds that
notice and public comment are unnecessary due to the routine nature
of the matter or the insignificant impact of the rule; or
" (E) emergency rule.
" (2) In the case of a rule for which an agency makes a finding
under subparagraph (D) of paragraph (1) of this subsection, the agency
-4-
shall publish the rule in the Federal Register with a statement of the
finding of the agency under such subparagraph and the reasons therefor.
" (3) In any case in which an agency promulgates an emergency rule--
" (A) the agency shall publish the rule in the Federal Register
with a statement which describes the emergency necessitating
the promulgation of the rule, the reasons why the agency
chose the rule promulgated as a response to the emergency, and
the reasons why the agency was unable to comply with the
provisions of subsections (c) through (g) of this section prior to
the promulgation of the rule;
"(B) the agency shall comply with the provisions of sub-
sections (c) through (g) of this section as soon as practicable after
the promulgation of the emergency rule; and
" (C) the emergency rule may not be effective longer than a
reasonable period necessary to complete agency compliance with
subsections (c) through (g) of this section.
" (c) (1) Notice of proposed rule making shall be published in the
Federal Register, unless each person subject thereto is named and
personally served with notice or otherwise has actual notice
thereof in accordance with law. Such notice shall include--
" (A) a statement of the time, place, and nature of the public
rule making proceedings;
" (B) a statement of the specific statutory authority under which
the rule is proposed and the specific Congressional intent sought
to be achieved by the rule;
" (C) the proposed provisions of the rule, including a succinct
statement of the need for, and the objectives of, the rule;
" (D) a statement that the agency seeks proposals from the
public for alternative ways to accomplish the objectives of the
proposed rule that are more effective or less burdensome than the
-5-
approach used in the proposed rule;
" (E) a description of the data, methodology, reports, studies,
or other information upon which the agency plans to substantially
rely in the rule making, and of the purposes for which the agency
plans to rely on such information, including an identification of
the authors or sources of such information;
" (F) a statement of where the file of the rule making proceeding
maintained pursuant to subsection (f) of this section may be inspected
or copies of the file may be obtained at a reasonable cost; and
" (G) a determination of whether the proposed rule is or is not a
major rule and a short statement of the basis thereof.
" (2) When the agency publishes a notice of proposed rule making for
a major rule, the agency shall also publish--
" (A) a description of the benefits of the proposed rule,
including any beneficial effects that cannot be quantified; and
an explanation of how the agency anticipates each such benefit
will be achieved by the proposed rule, including a description
of the persons or classes of persons likely to receive such benefits;
" (B) a description of the costs of the proposed rule,
including any adverse effects that cannot be quantified; and
an explanation of how the agency anticipates each such cost or adverse
effect will result from the proposed rule, including a description of
the persons or classes of persons likely to bear such costs or
adverse effects;
" (C) a description of reasonable alternatives for achieving
the identified benefits of the proposed rule, including alternatives
that require no government action; that will accommodate differences
between geographic regions; and that employ standards which permit
the greatest flexibility in achieving the identified benefits
of the proposed rule; and
-6-
" (D) except where the enabling statute pursuant to which the
agency is acting directs otherwise, an explanation of how the
benefits of the proposed rule are likely to justify the costs
and adverse effects of the proposed rule, and an explanation
of why the proposed rule is likely to substantially achieve the
rule making objectives in a more cost-effective manner than the
alternatives to the proposed rule.
" (3) An agency shall describe the nature and extent of the non-
quantifiable benefits, costs, and effects of the proposed rule
required to be described under paragraph (2) in as precise and succinct a
manner as possible. The description of the benefits, costs, and adverse
effects of a proposed rule required under paragraph (2) shall include a
quantification or numerical estimate of the quantifiable
benefits, costs, and effects. Such quantification or numerical
estimate shall include an explanation of the margins of error involved
in the quantification methods and in the estimates used. The agency
evaluations of the relationship of the benefits of a proposed rule to
its costs and adverse effects required by this section shall be
clearly articulated in accordance with the provisions of this section.
An agency is not required to make such evaluation primarily on a
mathematical or numerical basis.
" (4) Any supplement to or modification or revision of the notice
of proposed rule making that is significant shall be published by the
agency in the Federal Register and shall contain the information
required by this section.
" (d) (1) After publishing the notice of proposed rule making
required by subsection (c) of this section, the agency shall give interested
persons not less than sixty days to participate in the rule making through
the submission of written data, views, arguments, and statements. The
agency may use such other procedures as it determines are appropriate for
--7-
a particular rule making.
" (2) The agency, by timely notice in the Federal Register, shall
extend the time for participation in the rule making for a period of not
less than thirty days if--
" (A) such an extension is requested in writing by a participant
whose personal rights or economic interests are directly and
adversely affected by the proposed rule; and
" (B) such request is received by the agency no less than ten
days before the sixty-day period for participation in the rule
making has expired, unless this limitation is waived by the agency;
provided that no extension of time need. be granted if the administrative
officer responsible for orderly participation in the proceeding makes a
written finding that an extension of time is contrary to the public
interest, transmits that finding to the participant requesting the
extension, and publishes that finding in the Federal Register within
ten days of the receipt of the request for an extension.
" (3) When the agency publishes a notice of proposed rule making for
a major rule, the opportunity for participation in the rule making provided
by paragraph (1) shall also include an opportunity to make oral presenta-
tions of data and information relevant to a significant controversy in
the rule making. This opportunity for oral presentations shall include
an opportunity for cross-examination only (i) when requested by interested
persons for the resolution of material issues of fact and (ii) when other
available procedures for the resolution of such issues, including oral
and written rebuttal, are determined to be inadequate. The agency may
establish reasonable procedures to regulate the course of oral presentations
to ensure an orderly and expeditious proceeding.
" (4) When rules are required by statute to be made on the record
after opportunity for an agency hearing, sections 556 and 557 of this
title apply instead of this subsection.
-8-
" (5) Nothing in this section authorizes the use of appropriated
funds available to any agency to pay the attorney's fees or other expenses
of persons participating or intervening in agency proceedings.
" (e) (1) Except for rules which grant or recognize an exemption or
relieve a restriction, a final rule shall be published in the Federal
Register not less than thirty days before its effective date. Publication of
a final rule shall be accompanied by a statement of its basis and purpose,
which shall include--
" (A) a statement of the need for, and the objectives of, the rule;
" (B) a description of each of the alternatives to the rule which
were considered by the agency, and a statement of reasons why each
alternative was rejected;
" (C) a memorandum of law supporting the determination of the
agency that the final rule is within the authority delegated
by law and consistent with Congressional intent;
" (D) a succinct explanation of how the factual conclusions
upon which the rule is based are substantially supported in the
rule making file, including a summary of the assessment made by
the agency of the comments presented by the public; and
" (E) a description of the data, methodology, reports, studies,
or other information upon which the agency is substantially relying in
promulgating the final rule, and of the purposes for which the agency is
relying on such information, including an identification of the author
or sources of such information.
" (2) When a final major rule is published, the statement of basis and
purpose shall also include--
" (A) a description and comparison of the
benefits, costs, and adverse effects of the rule; and
" (B) except where the enabling statute pursuant to which the
agency is acting directs otherwise, a reasonable determination, based
-9-
upon the rule making file considered as a whole, that the benefits
of the rule justify the costs and adverse effects of the rule,
and that the rule will substantially achieve the rule making objectives
in a more cost-effective manner than the alternatives described
in the rule making.
" (3) The preparation of the notice required by subsection (c), and
the preparation of the statement of basis and purpose required by this
subsection, including any description or analysis of the benefits, costs, and
adverse effects of a proposed rule, shall only be performed by an
officer or full-time employee of the agency. This requirement shall
not apply to the gathering of information to be used in such notice or
statement. If such information is gathered by a source outside of the
agency, the agency shall specifically identify, in the notice of proposed
rule making or in the statement of basis and purpose, the information
gathered and such source, and shall describe the arrangement by which
the information was procured by the agency, including the total amount
of funds expended for such procurement.
" (4 ) In promulgating a final rule, the agency may not rely on any
written material that was not identified in the notice of proposed rule
making unless--
" (A) such material was placed in the rule making file; or
" (B) notice was otherwise given that the agency intends
to take notice of information appearing elsewhere, and interested
persons were given an adequate opportunity to comment upon
such material prior to promulgation of the final rule.
" (f) (1) The agency shall maintain a public file for each rule making
proceeding. The file and the material excluded from the file pursuant to
paragraph (2) of this subsection shall constitute the rule making record
for purposes of judicial review. Except as provided in paragraph (2) of
this subsection, the file shall contain all the relevant matter before
-10-
the agency as a result of the rule making, including--
"(A) the notice of proposed rule making and any supplement to or
modification or revision of such notice;
(B) copies, or an identification of the place at which copies
may be obtained, at a reasonable cost, of all studies and documentary
material upon which the agency substantially relied in formulating
the rule;
" (C) all written comments received on the proposed rule;
" (D) transcripts of any oral presentation or cross-examination
taking place in the rule making;
" (E) all material that the agency by law is required to make
public in connection with the rule making; and
" (F) any statement, description, or analysis required to be
prepared by the agency in formulating the rule, including the
statement of basis and purpose published by the agency with a final
rule pursuant to subsection (e).
" (2) The file required by paragraph (1) of this subsection need not
include any material that is exempt from public disclosure under section
552 (b) of this title if the agency includes in such file a statement
that notes the existence of such material and the basis upon which such
material is exempt from public disclosure under such section.
"(3) No court shall hold unlawful or set aside an agency rule
because of--
" (i) an inadequacy in the statement required to be published
pursuant to paragraphs (2) and (3) of section 553 (c) and paragraph
(2) of section 553 (e), or
"(ii) a failure by the agency to afford an opportunity for
cross-examination pursuant to subsection (d) (3) of this section,
unless the court finds, upon review of the whole rule making record, that
such inadequacy or failure renders the rule unlawful under Section 706 (a)
-11-
(2) (A), (B), or (C) of this title.
" (4) Any analysis of a proposed or a final rule required by another
provision of this title or by another statute may be included in the notice
of proposed rule making and in the statement of basis and purpose published
with a final rule under this section to the extent that such analysis
satisfies, or is not inconsistent with, the requirements of this section.
" (g) Each agency shall give an interested person the right to
petition for the issuance, amendment, or repeal of a rule. "
REGULATORY REVIEW
Section 4. (a) Subchapter II of chapter 5 of title 5, United States
Code, is amended by adding at the end thereof the following new section:
"$560. Review of agency rules.
" (a) (1) Not later than nine months after the effective date of this
section, each agency shall prepare and publish in the Federal Register
for comment by interested persons a proposed schedule for the review,
within a ten-year period beginning on the effective date of this section,
of each major rule in effect on such date.
" (2) At least ninety days before publishing the proposed schedule in
the Federal Register, each agency shall make the proposed schedule avail-
able to the President or an officer designated by him. Each proposed
schedule shall contain a brief explanation of the reasons the agency
considers each rule on the schedule to be a major rule and shall include
a date set by the agency for the completion of the review of each such
rule. The agency shall set a date for initiation of review of each item
on the schedule in a manner to ensure the simultaneous review of
related items and to achieve a reasonable distribution of reviews over
the period of time covered by the schedule. The President or an officer
designated by him may select additional rules to be reviewed pursuant to
subsection (c) of this section.
= (3) Not later than one year after the effective date of this
section, each agency shall publish in the Federal Register a final schedule
for the review of the rules referred to in paragraphs (1) and (2). Each
agency shall publish the response of the agency to comments received
concerning the proposed schedule with the final review schedule.
" (4) Except where explicitly provided otherwise by statute or where
an extension has been granted pursuant to subsection (f), each major rule
that is in effect on the date of enactment of this section shall be
-13-
reviewed by the agency within ten years of the date of enactment
of this section. Pursuant to such review, the agency shall
determine to renew, amend, or rescind that rule.
" (b) (1) Except where explicitly provided otherwise by statute or
where an extension has been granted pursuant to subsection (f), each
major rule promulgated, amended, or otherwise renewed by an agency
after the date of enactment of this section shall be reviewed
by the agency within ten years of the date on which such a rule
becomes effective. Pursuant to such review, the agency shall
determine to renew, amend, or rescind that rule.
" (2) The President or an officer designated by him may select
additional rules that were promulgated by an agency after the date of
enactment of this section to be reviewed pursuant to subsection (c)
of this section.
" (c) An agency shall publish in the Federal Register a notice of
its proposed action regarding a rule being reviewed. The notice shall
include--
" (1) an identification of the specific statutory authority
under which the rule was promulgated and a determination of
whether the rule continues to fulfill the intent of Congress
enacting that authority;
" (2) an assessment of the benefits, costs, and adverse
effects of the rule during the period in which it has been
in effect;
" (3) an explanation of the proposed agency action with
respect to the rule;
" (4) for a rule that the agency determines no longer
falls within the definition of a major rule, or for a rule
that the agency proposes to renew with modifications that would
exclude the rule from the definition of a major rule, an
explanation of the determination or proposal; and
" (5) a statement that the agency seeks proposals from
the public for modifications or alternatives to the rule which
may accomplish the objectives of the rule in a more effective
or less burdensome manner.
" (d) If an agency proposes to rescind or amend the rule,
after issuing the notice required by this subsection the agency
shall comply with the provisions of section 553 of this chapter; and
the requirements of that section and related requirements of law
shall apply to the same extent, and in the same manner, as in the
case of a proposed agency action which is not taken pursuant to
the review required by this section.
" (e) If an agency proposes to renew the rule without amendment,
the agency shall--
" (1) give interested persons not less than sixty days after
the notice required by this subsection to comment on the
renewal; and
" (2) publish the renewed rule in the Federal Register at
least thirty days prior to the date on which the renewal of the
rule is to become effective with an explanation of the
reasonable determination of the agency that the rule continues
to comply with the provisions of
subsection (e) (2) (B) of section 553.
" (f) (1) Any agency, which for good cause finds compliance with this
section with respect to a particular rule to be impracticable during the
period provided in subsection (a) or (b), may request the President,
or an officer designated by him, to establish a period longer than
ten years for the completion of the review of such rule. The President
- 15 -
or an officer designated by him may extend the period for review
of a major rule to a total period of not more than fifteen years.
Such extension shall be published in the Federal Register with an
explanation of the reasons therefor.
" (2) An agency may, with the concurrence of the President or
an officer designated by him, amend any schedule required by this
section for the review of rules if such amendment is published in
the Federal Register.
" (g) In any case in which an agency has not completed the
review of a major rule within the period prescribed by subsections
(a), (b), or (f), the agency shall immediately publish a notice
proposing to withdraw or renew the rule under subsection (c), and
shall complete proceedings pursuant to subsection (d) within 180
days of the date on which the review was required to be completed
under subsections (a), (b), or (f) .".
(b) The table of sections for such chapter is amended by
inserting after the item relating to section 559 the following new
item:
"560. Review of agency rules. ".
6-
JUDICIAL REVIEW
Section 5. Section 706 of title 5, United States Code, is amended to
read as follows:
"§706. Scope of review
" (a) To the extent necessary to decision and when presented, the
reviewing court shall independently decide all relevant questions of law,
interpret constitutional and statutory provisions, and determine the
meaning or applicability of the terms of an agency action. The
reviewing court shall--
" (1) compel agency action unlawfully withheld or unreasonably delayed;
and
" (2) hold unlawful and set aside agency action, findings and
conclusions found to be--
" (A) arbitrary, capricious, an abuse of discretion, or other-
wise not in accordance with law;
" (B) contrary to constitutional right, power, privilege or
immunity;
" (C) in excess of statutory jurisdiction, authority, or
limitations, or short of statutory right;
" (D) without observance of procedure required by law;
" (E) unsupported by substantial evidence in a proceeding subject
to sections 556 and 557 of this title or otherwise reviewed on
the record; or
" (F) without substantial support in the rule making file, viewed
as a whole, for the asserted or necessary factual basis, as distinguished
from the policy or legal basis, of a rule adopted in a proceeding
subject to section 553 of this title; and
" (G) unwarranted by the facts to the extent that the facts are
subject to trial de novo by the reviewing court.
EFFECTIVE DATE
Section 8. (a) The amendments made by sections 2, 3, and 5 of this
Act shall take effect on January 1, 1983, and shall apply to any
rule making proceeding for which a notice of proposed rule
making has been issued after such date.
(b) The amendment made by section 4 of this Act shall take effect
six months after the date of enactment of this Act and shall apply
according to the provisions thereof.
(c) The amendment made by section 6 of this Act shall take effect
three months after the date of enactment of this Act and shall apply,
according to the provisions thereof, to review proceedings instituted
after such date.
(d) The amendment made by section 7 of this Act shall take effect
six months after the date of enactment of this Act and shall apply
according to the provisions thereof.
-17-
" (b) In making the foregoing determinations, the court shall
review the whole record or those parts of it cited by a party, and due
account shall be taken of the rule of prejudicial error.
" (c) In making determinations under clause (2) (C) of subsection
(a) of this section, the court shall require that action
by the agency is within the scope of the agency
jurisdiction or authority on the basis of the language of the statute
or, in the event of ambiguity, other evidence of legislative intent.
In making determinations on other questions of law, the court shall
not accord any presumption in favor of or against agency action.
VENUE
Section 6. Section 2112 of title 28, United States Code, is amended
by deleting the last three sentences of subsection (a); redesignating
subsections (b), (c) and (d) as subsections (c), (d) and (e), respectively;
and inserting the following as new subsection (b):
" (b) (1) If proceedings have been instituted in two or more courts of
appeals with respect to the same order and the first such pro
ceeding was instituted more than ten days before the second, the record
shall be filed in that court in which the proceeding was first
instituted. If the first such proceeding was not instituted more than
ten days before the institution of a second proceeding with respect to the
same order,
the agency, board, commission, or officer concerned
shall promptly advise in writing the Adminístrative Office of the United
States Courts that such multiple proceedings have been instituted.
Pursuant to a system of random selection devised for this purpose, the
Administrative Office thereupon shall select the court in which the
record shall be filed. Upon notification of such selection, the agency,
board, commission, or officer concerned shall promptly file the record
in such court.
-18-
" (b) (2) Where proceedings have been instituted in two or more
courts of appeals with respect to the same order and the record
has been filed in one of such courts pursuant to paragraph. (1), the other
courts in which such proceedings are pending shall promptly transfer
such proceedings to the court of appeals in which the record has been
filed. Pending such transfer, any court in which a proceeding has been
instituted shall have jurisdiction to grant preliminary relief. Any order
granting such relief shall be subject to reconsideration in the court to
which the proceeding is transferred.
" (b) (3) Any court in which a proceeding with respect to any
order
is pending, including any court selected pursuant
to paragraph (1), may transfer such proceeding to any other court
of appeals for the convenience of the parties or otherwise in the
interest of justice. "
REGULATORY AGENDA AND CALENDAR
Section 7. (a) Subchapter II of chapter 5 of title 5, United States
Code, is further amended by adding at the end thereof the following new
section.
"$561. Regulatory Agenda and Calendar
" (a) Each agency shall publish in the Federal Register in April and
October of each year an agenda of the rules that the agency expects to
propose, promulgate, renew, or withdraw in the succeeding twelve months.
For each such rule, the agenda shall contain, at a minimum, and in
addition to any other information by law--
" (1) a general description of the rule, including a citation to
the authority under which the action is to be taken, or explanation of the
specific Congressional intent to which its objectives respond;
" (2) a statement of whether or not the rule is a major rule within
the meaning of paragraph 16 of Section 551 of this title;
" (3) an approximate schedule for the significant action dates relating
-19-
to the rule, including the dates for any notice of proposed rule
making, hearing, and final action on the rule; and
" (4) the name, address, and telephone number of an agency official
responsible for answering questions from the public concerning the rule.
" (b) The President or his designee shall publish in the Federal
Register in May and November of each year a Calendar of Federal
Regulations listing each of the major rules identified in the
regulatory agendas published by agencies in the preceding months.
Each rule listed in the Calendar shall be accompanied by a summary of the
information relating to the rule that appeared in the most recent
regulatory agenda in which the rule was identified.
" (c) An agency may propose or promulgate a major rule that was not
listed in the regulatory agenda required by subsection (a) of this section
only if it publishes with the rule an explanation of the omission of the
rule from such agenda and otherwise complies with this section with
respect to that rule.
" (d) Any determination by an agency concerning the applicability of this
section to any action of the agency shall not be subject to judicial
review. "
(b) The table of sections for such chapter is amended by
inserting at the end therof the following new item:
"561. Regulatory Agenda and Calendar. "