BY SENATOR KOHL TO ROBERT J. CYNKAR QUESTION 1. Section 621 defines a "major" rule that would be subject to the mandates of S.343. The definition encompasses any rule, or group of "closely related rules" that are likely to result in (i) "a substantial increase in costs or prices for wage earners, consumers, individual industries, nonprofit organizations, and [local governments];" or (ii) "significant adverse effects on competition, employment, investment, productivity, innovation. ..or the ability of enterprises... to compete in domestic or export markets." Do you believe that the "substantial increase" and "adverse effect" standards quoted above constitute workable definitions? Is it not the case that a skilled advocate could colorably argue on judicial review that almost any rule might fall within the ambit of (i) or (ii) above in light of the expansive nature of these definitions? And doesn't this mean that the distinction between "major" and "minor" rules is likely to be of little value? ANSWER: In response to this question, I would make a few basic points that I think need to be remembered. As a litigator myself, I think it is true that lawyers can create issues for argument from even the most precise statutory text. If one were to evaluate any proposed statutory language on the basis of what a "skilled advocate" could do with it, no legislation would ever be enacted. More importantly, when Congress is enacting legislation dealing with the powers of the instrumentalities of government to act, it is commonly addressing questions of human judgment and discretion. After all, if Congress could so precisely legislate in a variety of areas, there would be no need for administrative agencies. Thus the language that Congress has to rely on in working on such legislation will be words like those used in § 621 of S.343. To be sure, the need to make the judgments of agencies accountable when they are given such powers underscores the importance of judicial review, where a neutral third party can itself make a judgment whether the agency's exercise of its discretion was reasonable. Indeed, to a certain extent the question appears to be based on the premise that courts cannot do their job. That is, that they can be buffaloed by a fast-talking lawyer that an insignificant regulation in fact will have the kind of major effects described in § 621. It has not been my experience that the courts are so susceptible to manipulation by members of the Bar. Moreover, the kinds of phrasing used in § 621 are very close to the language used in S.1080, and so presumably reflected the judgment of the Senate that these kinds of words and distinctions are meaningful. Indeed, President Clinton's Executive Order No. 12866, in § 2(f)(1). uses the same kind of judgmental language. In short, these words have been relied upon, on a bipartisan basis, both by Congress and the Executive to give meaning to the distinction between major and minor rules. QUESTION 2. Are you supportive of section 624 which provides for interlocutory judicial review of the government's decision that a particular regulation is not a "major" rule within the meaning of section 621? - (a) If you are, please explain why you believe the increased litigation resulting from such interlocutory review as opposed to comprehensive review following promulgation of a would be justified; that is, what are the benefits that exceed those very real and substantial rule - costs? (b) Litigation of the "major rule" question might well involve argument over whether a particular proposed rule would have the economic effects noted above in question #1; there can be little doubt that litigation of this sort would occasion frequent battles of experts and consultants. Is it wise, cost-effective, and consistent with the competence of the federal courts to embroil them in debates over whether any given rule no matter the regulatory context will have significant adverse effects on competition, employment, investment, etc. - - ANSWER As I described in my prepared statement. I have reservations about whether interlocutory review of the major rule determination makes sense. It seems to me that the question of whether an agency correctly did not characterize a rule as a major rule can be an issue on review of the final rule. If the agency was wrong in this characterization, the rule should be remanded to the agency for further proceedings consistent with the new characterization of the rule. QUESTION 3. Are you supportive of section 625 which allows private parties affected by existing, major rules to petition for their analysis under the cost-benefit mechanism set forth in S.343? (a) Is it unreasonable to venture that, at the very least, many hundred, if not more than one thousand rules might be subject to such petitions? (b) Shouldn't the Subcommittee be concerned that the unrestrained submission of section 625 petitions (which must be processed within short, fixed time limits) might overwhelm regulatory agencies, effectively dominating and displacing their regulatory agendas, and preventing them from attending to other matters and issues that might require prompt and substantial action? (c) If you are supportive of section 625, please explain why you believe the standard for granting petitions (found in section 625(a)(3)) is appropriate. Subparagraph (3) of section 625(a) provides that the Administration shall grant a petition -- that is, conduct a cost-benefit analysis -if "reasonable questions" exist as to whether the net benefit of a given rule do, indeed, exceed its net costs. Is it not the case that competent regulatory lawyers and economists could, in most instances, convince a court that "reasonable questions" exist? And doesn't this mean that the standard set forth in subparagraph (3) does little, if anything, to limit the set of Petitions requiring review to those that have the most merit? (d) Are you supportive of section 625(a)(4) which provides for judicial review of refusals to grant section 625 petitions? In light of the low, "reasonable question" threshold for the grant of such petitions, is it not reasonable to assume that private parties would, in most instances, be quite willing to litigate the denial of a petition? It you endorse section 625(a)(4), please explain why you believe the increased federal court litigation resulting from such review would be justified; that is, what are the benefits that exceed these significant costs? ANSWER: I think that it is very hard to estimate how many rules might be subject to a petition under § 625. First of all, it must be remembered that the Administrative Procedure Act currently allows interested persons the right to "petition for the issuance, amendment or repeal of a rule." 5 U.S.C. § 553(e). It does not seem to be sensible policy to me to repeal this provision and so limit rights that citizens have enjoyed since the APA was passed. Given that the right to petition for the amendment of a rule will continue to exist, it also seems sensible to me that Congress address how the new analytical methodologies to be followed in the promulgation of major rules should be handled under the petition process. I do not think that the particular language chosen in § 625 is the only way of addressing this point. Indeed, some of the concerns expressed in this question are well taken. I have not, at this point. come up with any alternative language for this section, however. QUESTION 4. Section 627 of S. 343 prohibits the promulgation of any federal regulation "that expands Federal power or jurisdiction beyond the level of regulatory action needed to satisfy statutory requirements. . ." (emphasis added). Please respond to the following comments about section 627 that were made by Professor Cass Sunstein of the University of Chicago in written testimony submitted to the Subcommittee: "The basic problem is that the section appears to be based on a misunder- sue 'necessary and appropriate' rules to implement their statutory authority "Ordinarily, and strictly speaking, no particular rule is 'needed to satisfy ANSWER: It is not clear to me what § 627 is attempting to achieve. Much of Professor Sunstein's comment quoted in the question seems to be correct. However, it must be remembered that all of an agency's power is delegated to it by the Congress. In other words, what "Congress has expected [an agency] to do" must be found in the grant of authority from Congress in a statute. The APA as it is currently written is designed to empower courts to prevent agencies from exceeding this delegated authority. Thus, § 627 seems to proceed from some concern that this aspect of the APA needs some improvement. Since I have not seen any explanation by the drafters of what they were after here, it is hard to make any further comment. QUESTION 5. Do you believe that, in their oversight of the executive's regulatory decisionmaking, the federal courts should be compelled to evaluate and choose between competing costbenefit analyses and risk assessment methodologies, as they might be under the judicial review provisions of S. 343? Are such sophisticated, fact-intensive and ultimately subjective judgments" within the core competence of the judicial branch? ANSWER: I think that this question is premised on the faulty notion that agency rulemakings do not now rely on "subjective judgments". In fact, the analytical methodologies proposed in S.343 are designed to make explicit the value judgments any rational agency decision-maker must make now, and, by virtue of the methodologies required, to reduce the subjective component of these decisions. By making the agency's analysis more explicit, these methodologies will improve reasoned decision-making by an agency, reduce the need for judicial review, and, where judicial review does occur, make it more meaningful in setting out the agency's thinking more clearly. I say that these judgments are ultimately subjective because testimony submitted to this subcommittee and others on the subject of cost-benefit analysis has clarified that the quantification of 'costs" and "benefits" -- however appropriate -- is inescapably value-laden and highly discretionary. RESPONSES TO QUESTIONS SUBMITTED BY SENATOR THURMOND TO ROBERT J. CYNKAR QUESTION I Mr. Cynkar and Mr. Freeman, on average, how long do you think it would take for an agency to conduct an adequate cost-benefit analysis, and on average how much do you think it would cost? ANSWER: I think it is hard to make the kind of estimate that this question calls for. A costbenefit analysis will vary depending upon the particular rule involved. And though I do not think that unnecessary burdens should be imposed on regulatory agencies, ultimately it must be remembered that the point of reference for regulatory reform legislation is not the burden on government, but the burden government imposes on citizens. Indeed, the concern goes far beyond merely burdens. Cost-benefit analysis is a methodology designed not only to identify costs, but to determine whether resources are being used effectively on behalf of the benefits a government agency wishes to achieve. QUESTION 2. Could you both please discuss your views on the method or difficulties in determining the full costs of proposed regulations on businesses and the full benefits for society? ANSWER. The Senate Judiciary Committee thoughtfully described the performance of costbenefit analysis in its report on S.1080, when the Committee was chaired by Sen. Thurmond. I would endorse that description. At bottom, when agencies are promulgating regulations that have broad and significant effects on the country, it is irrational for them not to employ methodologies like cost-benefit analysis and risk assessment. QUESTION 3. Could you both please discuss whether you think the definition of "major rule", with its $50 million limit, is satisfactory? ANSWER In large measure the definition of "major rule" in S.343 parallels that originally adopted by the Senate in S. 1080, and reflects the similar concept used in Presidential executive orders. I do not have a strong feeling about whether the dollar trigger for a major rule should be pegged at $50 million or $100 million. I believe that the judgment a senator needs to exercise is whether he or she can represent to his or her constituents that a $50 million impact on the nation is not significant enough to require an agency to closely examine what it proposes to do. QUESTION 4. Could you both please state whether you think there would be significant interest among businesses in reexamining existing rules which have an annual cost of $50 million or more? What is your view on whether petitions for review of existing rules would overwhelm the agency resources available for conducting such reviews? ANSWER: Under the Administrative Procedure Act, 5 U.S.C. § 553(e), citizens have the right to petition an agency "for the issuance, amendment, or repeal of a rule." As a result, I am a bit skeptical concerning the warnings of some critics that the petitions for review proposed by S.343 would necessarily "swamp" an agency. Since I would not recommend that the existing rights of citizens to petition an agency be repealed, it does seem sensible for that petition provision to take account of the new methodologies that would be required for major rules. I do not think that the provision in S.343 is necessarily the only way to accomplish this, however. Indeed, some of the language in S.343 could be tightened a bit. QUESTION 5 Mr. Cynkar and Mr. Freeman, if you could make three substantive changes in S 343, what they be RESPONSES TO QUESTIONS SUBMITTED BY SENATOR HEFLIN TO ROBERT J. CYNKAR QUESTION I. The definition of a major rule includes all rules which have an effect on the economy of $50 million or more. Starting with President Carter up to President Clinton the test for effect on the economy has stood at $100 million. Do you agree with the lower dollar amount which is in this bill, and what is the reasoning behind your position? ANSWER: I frankly do not have a strong position on whether the trigger for cost-benefit analysis should be a rule with an effect of $50 million or $100 million. I think that setting the trigger at $50 million can be justified by recognizing that this amount represents a significant regulatory impact on the economy, and so a cost-benefit analysis of a rule that will have such an effect seems sensible. Though the $50 million-trigger will expose to cost-benefit analysis a greater number of rules than a $100 million-trigger, critics that suggest this will expose "nearly every" rule to cost-benefit analysis have not offered any evidence to support such a sweeping characterization. On the other hand, Sen. Heflin is quite correct that $100 million has been a trigger level for cost-benefit analysis as it has been used by the Executive Branch. The goals of enhancing agency decision-making and accountability might be advanced by keeping the trigger at $100 million if the other reforms of the informal rulemaking procedure I have suggested are included in this bill. Ultimately, a senator voting on this provision must make the judgment of whether his or her constituents would believe that a regulation that has a $50 million effect on the economy is not "significant enough" to warrant the closer study mandated by cost-benefit analysis. QUESTION 2. In your written testimony you both commented on the new concept of marketbased mechanism, which must be assessed under the cost-benefit analysis formula in the bill. To achieve the goal of this concept the regulated entity is provided the flexibility to fulfill the regulatory obligation. Since in many instances the mechanisms may be untested how can an agency assess the feasibility of such a concept? ANSWER: Whether a particular approach to a specific problem being addressed by an agency is "feasible" is hard to address in the abstract. Indeed, the sad history of federal regulation has shown that even "accepted" forms of regulation have a vast array of unintended consequences, and were not as well-thought out as they should have been. The analytical mechanisms of costbenefit analysis and risk assessment included in S.343 are important reforms to agency procedure to compel agencies to consider a broader variety of options in fulfilling their missions and to follow more thorough and public methods in evaluating any course an agency is planning to pursue. In my view, encouraging an agency to consider market-based mechanisms in achieving its goals is based on a concern for the unintended consequences of government regulation, and the view that approaching a problem with the least restrictive alternatives is a prudent course to mitigate those consequences. Indeed, all regulatory policy judgments are, at bottom, just that. judgments based on available information and analysis. Whether agency judgments about a particular regulatory course are correct commonly cannot be evaluated until that course has been followed and the real effects made known. In short, the agency assessment of the use of a market-based mechanism is really no different than the agency assessment of other types of approaches to regulation. QUESTION 3. Please state what provisions of S.343 need amending, and what amendments you would suggest. What, if any, sections should be deleted? What provisions from S. 1080 should be added to S.343? ANSWER. I would recommend that the Subcommittee adopt the changes to 5 U.S.C. § 553 that were proposed by the Judiciary Committee in S.1080. I would also add the provision in S. 1080 that provided for regulatory agencies to review their existing rules. |