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that they should challenge it. I want them to stand up and say we are not doing it.

There is not enough political gumption to do that because there is a lot of money involved, and the Department of Transportation is threatening to cut off over $200 million of highway funds immediately.

Senator GRASSLEY. Well, you might suggest to your governor that if Governor Allen can do it, she might be able to do it. She is in the forefront of governors getting a lot of notoriety about, you know, the States taking control generally, as opposed to Washington controlling, and a whole new effort on the part of governors to be a force, and I think they can be. If Governor Allen can do it, she can surely do it, and she wouid surely want to do for small businesses such as yours.

My second question would deal with the central emissions rule. I think you know that this was supposed to be the most cost-effective way to reduce emissions. You know, just thinking about the wasted time and effort that motorists put forth in this process, do you really think that this is the most cost-effective method, or do you maybe think it is just something that some eggheads in some ivory tower have come up with to make these determinations?

Mr. RISALVATO. "Eggheads” is a good word. I have a another term that decorum prohibits me from using here today. I don't see any benefit to the motoring public at all. Central emissions is not going to do it. The system we have now is fabulous. We test the emissions annually with a safety inspection. They are going to ask us to use more sophisticated equipment, spend thousands of dollars to do it, and test it biannually. The reason for the biannually is because of the anticipated lines and the time that the emissions inspection is going to take. So there just simply wouldn't be enough physical capacity to test every year.

Now, here is a real thorn. They have decided to allow New Jersey to continue with its private inspection system, but we will only be able to test cars that are 4 years old or newer. Now, we are going to be using the same equipment, mandated by law, that the State of New Jersey is going to use. It is going to do the same thing. Why can't we test cars that are older than 4 years old? I don't know. Nobody can answer that question, and we are not challenging the EPA on it and I don't know why. I am frustrated with

Senator GRASSLEY. Thank you each very much for your testimony, and I hope you will keep in touch with us and we may be calling upon you for further response to some specific parts of the bill if we decide that there needs to be some rewriting of the legislation. Thank you very much.

Mr. KEITH. Thank you, Mr. Chairman.
Mr. O'CONNOR. Thank you, Mr. Chairman.
Mr. RISALVATO. Thank you.

Senator GRASSLEY. I now want to call a person who has been very much a friend of this subcommittee over several years. He is Marshall Breger, senior fellow now at the Heritage Foundation, and also a visiting professor at the Columbia School of Law and at Catholic University. There, he teaches administrative law. He has had a variety of positions, including solicitor of the Labor Depart

it.

ment and Acting Assistant Secretary of the Office of Labor Management Standards. From 1985 until joining the Department of Labor, Mr. Breger was the chairman of the Administrative Conference, and that is where he interacted with this committee to such a great extent.

Peter Ferrara is an expert in public policy, specializing in health care, tax reform, crime, Social Security, welfare, Medicare, education, and labor law. He served as policy adviser to the Attorney General, U.S. Department of Justice, where he headed departmental working groups on various policy issues. He has represented clients in litigation matters in the Federal courts, primarily involving banking, regulatory, and constitutional law, as counsel for the law firm of Shaw, Pittman, Potts, and Trowbridge. He was a senior fellow at the Cato Institute. He was also a senior staff member of the Office of Policy Development. Additionally, he was special assistant at the Department of Housing and Urban Development.

I will start with you, Mr. Breger, and then Mr. Ferrara.

PANEL CONSISTING OF MARSHALL J. BREGER, SENIOR FELLOW, HERITAGE FOUNDATION, WASHINGTON, DC; AND PETER J. FERRARA, SENIOR FELLOW, NATIONAL CENTER FOR POLICY ANALYSIS, WASHINGTON, DC

STATEMENT OF MARSHALL J. BREGER Mr. BREGER. Thank you very much, Mr. Chairman. It is a pleasure to be back before this subcommittee. I have some written testimony which I would ask you to accept as read.

Senator GRASSLEY. Yes, we will.

Mr. BREGER. I have a few oral remarks because I realize that the time is late, and I am happy to answer any questions that you may have.

I first would like to make two admonitions. Don't over-lawyer this legislation. You know, there is a tendency–when you get two lawyers into a room to write a contract, it gets larger and larger because they try to capture every single eventuality, and what they do in this effort to be more precise, to have more precision, is to create more ambiguity. Every time they fix a loophole, they create the possibility of another loophole.

Senator GRASSLEY. Is your admonition parallel to what Mr. Gellhorn was telling us earlier?

Mr. BREGER. Yes, it is.
Senator GRASSLEY. Proceed.

Mr. BREGER. Secondly, Congress itself, as you pointed out, must take some of the blame because of their lack in writing statutes of saying clearly what their goals are and saying clearly when they want agencies to balance. Often, they set agencies off on a single track and never tell them that there are some commonsense limits to that track.

With those points of caution, I would like to make four points. The first is don't let them fool you; Senate bill 343 is not radical legislation. Agencies are supposed to be doing cost/benefit analysis under the Clinton executive order. They should have been doing it under the Reagan executive order. They should have 10 years, at least, of experience with cost/benefit analysis.

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Now, this bill makes explicit that they should be looking at market mechanisms as an alternative, that they should be looking at performance standards as an alternative to command-and-control regulation. But it makes explicit what ought to have been implicit, what was common sense, that you should be looking for the least restrictive alternative in developing regulations.

So it is important to appreciate that the strictures or the requirements, the criteria, in this bill are criteria that, in the main, agencies should have been doing either because they were directed by the executive order or because of common sense.

Second, I think it is important to note the sections which include Congressional review of agency rules, the report and wait provisions. I think this is very important. With the Chadha decision in the 1980's and the rejection of the legislative veto, one important element of Congressional accountability was lost, the opportunity for Congress to say, agency, you misunderstood our delegation to you, you went too far afield from what we told you we wanted you to do.

Remember, in the last instance, the administrative agencies are implementing authority that they get from the Congress. They are implementing rules with a statutory base. They can only be doing what that statutory base lets them do. Because of the legislative veto, Congress lost its opportunity to say in a specific way, in this regulation you have gone off course. This gives an opportunity to do that once again. I have more confidence in looking at the materials that it meets both the bicameralism and the presentment clauses in the Constitution, and I am very pleased that the report and wait provision is back in this legislation.

Senator GRASSLEY. That in no way conflicts with Chadha, then?

Mr. BREGER. I don't believe so, and I can provide more written explication if you would want.

I believe the judicial review portions of this statute are important. I think it is important that the cost/benefit or regulatory impact analysis of the agency be subject to judicial review. That is a discipline on the agency that was not available in the past. I believe that is one of the major innovations in this legislation.

I would suggest that the statute has to be clearer as to what standard of review it wants. It appears that it wants to follow the Chevron standards. It appears to veer off when it talks about reasoned decisionmaking, and perhaps it wants to follow a more aggressive hard-look standard of review.

If it is the case, and I think it may be the case, that what Congress wants to do is to make sure that the regulatory impact aspects are actually adhered to rigorously by the agency, one clean solution may be for the statute to simply say, courts, when you do the judicial review that you are going to do anyhow, we are telling you to also review the regulatory impact statement and also review whether there is net benefit to society. So you can simply tell the courts, include this as one of your criteria for review, without laying out in detail, in some respects excruciating detail, the specifics of the standard for review. In the past, Congress has been chary of doing that because it gets into the problem of years and years

of judicial opinions as to what the exact parameters of the standard of review might be.

I think it is also important that this statute includes an opportunity for the agency to review its own rules, and I am very positive about the petition aspect of this statute. I think it is important that citizens be able to petition the agency to say, hey, take a look at this rule; is it still a good rule, is there still cost/benefit to the rule; if you were writing it again, would you write it this way.

I am not certain that you want to require a 180-day regulatory hammer because I don't think you would want to have the agency say, stop everything, we have got to stop everything else we are doing, we have got to look at this petition. But, certainly, a petition approach is a positive one.

I think, as well, that this statute might look to S. 291, which draws upon the wisdom of S. 1080 which says that the agencies have to set up a review cycle, a 10-year review cycle, by which they are going to look at all their rules, and they are going to be looking on a regular basis. When they introduce a rule, you know that it is going to be looked at over the next 10 years as to whether it still is cost/benefit net plus for the country. So I think that it is important to have an opportunity for the agency to review existing rules and for some form of petition process.

I think we have to be careful when we write this legislation that we don't make deregulation more difficult. The wisdom of the Supreme Court in the State Farm decision, for better or worse, is that you have to use the same reasoned decisionmaking process in deregulating as you use in regulating, and I think that we need to be careful that we don't add unnecessary burdens to the regulatory process that make it harder for us to deregulate.

Senator GRASSLEY. Does the term you use, “deregulation,” mean just striking regulations from the

Mr. BREGER. The process of withdrawing regulations, yes.
Senator GRASSLEY. From the code?

Mr. BREGER. Yes; under Supreme Court learning, an agencyCongress, of course, has the power to do this, but an agency can't say, we have decided that we no longer want to regulate dust in silos, period. They have to go through a decisionmaking process of some kind as to, having decided to go for it, why they want to stop and make the decision to go back. So we need to be sensitive to the fact that we hope to see deregulation, and we don't want to make that too difficult.

Having said that, this is very important legislation. It provides a new approach to the regulatory process, an approach that is codified. Cost/benefit has been in the executive orders, and unfortunately it has not always been followed by the agencies. They have not always followed those executive orders, as you pointed out. With this legislation, with the opportunity for judicial review, I think the likelihood that cost/benefit will become part of the regulatory apparatus, as common sense says it should be, is far greater.

Mr. Chairman, I thank you for the opportunity to speak and I am happy to answer any questions you may have.

[The prepared statement of Mr. Breger follows:]

axe.

PREPARED STATEMENT OF MARSHALL J. BREGER I am very pleased to be with you this morning and to discuss aspects of S. 343, the Comprehensive Regulatory Reform Act of 1995. S. 343 is the most significant effort to reform administrative procedure since 1982 when S. 1080 passed the Senate by 94-0. I congratulate Senator Dole and this Committee for taking up the cudgels of regulatory reform.

The results of last November's election can be understood as reflecting, in part, a tremendous distrust by citizens of the administrative bureaucracy, much of it justified. The press, as well as these hearing rooms have been replete with tales of bureaucratic excess and regulatory overreaching. Let me be frank, in part you and your predecessors in Congress are to blame. The delegations Congress often provides to agencies, even where constitutionally licit, are far too often vagrant and imprecise. They order an agency to let loose its hounds yet provide no guidance as to the limits of the charge. Or Congress does provide clear but one-sided statutory guidance and then complains when civil servants actually apply such statutory language to specific, albeit perhaps unanticipated, contexts.

This said, much of our present travail lies with misplaced bureaucratic zeal. If we are to maintain a productive society it is vital that we so cabin our administrative bureaucracy that we regulate what we must and no more. Our goal should be not to regulate to the max", but instead to regulate in such a way that we achieve our social goals while intruding as little as possible into the private ordering of economic relations. Requiring agencies to consider regulatory alternatives that (in Section 622's words) -employ performance or other market-based standards” or that operate through the application of market-based mechanisms” makes it more likely that any resultant rule will reflect use of a regulatory scalpel not a regulatory meat

It is to ensure that agencies apply such a scalpel that regulatory impact analysis is necessary. Such analysis can allow us to better structure rules to achieve more health, safety or environmental protection with the least social costs. We must remember, the Carnegie Commission's admonition that: “The economic burden of regulation is so great, and the time and money available to address the many genuine environmental and health threats so limited, that hard resource allocation choices are imperative."? Those choices are better informed by the knowledge regulatory impact analysis provides.

To support careful and attentive regulatory impact analyses is not a formula for regulatory paralysis. I do not believe and I am certain that you do not believe that there is a virtue in making the regulatory process so cumbersome and complex, that like salmon swimming upstream it is the very difficulty of the journey that causes so few to reach the headwaters. I am pleased to say that for the most part, S. 343 is properly attentive to this concern and propounds a balanced approach to regulatory oversight.

In that regard it is worth recalling the wisdom of. then Judge (now Justice) Stephen Breyer who underscored the problem that arises “when an agency so organizes or subdivides its tasks that each employee's individual conscientious performance effectively carries single-minded pursuit of a single goal too far, to the point where it brings about more harm than good.” ş Breyer calls this agency approach "tunnel vision” which is reflected he suggests, when an agency insists on going the last mile and regulating “the last 10 percent.” Indeed one former Superfund project manager, Leo Levinson, suggested that about 95 percent of the toxic material at a waste site could be removed in a few months but it takes years to clean up the remaining 5 percent. Our goal in regulating is never to get hung up on that last five, ten or fifteen percent.

At the same time we should be faithful to the insight of Philip Howard in his new book The Death of Common Sense. Howard suggests that we need less law and more judgement, less precision in our regulatory apparatus and more common sense. *Creating rules, without flexibility,” Howard points out, “is just a version of central planning.”

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REVIEWING EXISTING REGULATIONS One of the most difficult activities for a regulatory agency is the task of reviewing already existing regulations. As Solicitor of Labor in the Bush Administration I con

1 Except where a statute clearly mandates otherwise.

2 Carnegie Commission on Science, Technology, and Government, Risk, & the Environment: Improving Regulatory Decisionmaking (June 1993) at 118.

$S. Breyer, Breaking the Vicious Circle p. 11 (Harvard University Press 1993). * Philip Howard, The Death Of Common Sense 180 (N.Y. 1994) (hereinafter Common Sense).

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