POLITICS & POLICY

By JEFFREY H. BIRNBAUM Staff Reporter of THE WALL STREET JOURNAL WASHINGTON-California Rep. Henry Waxman calls it "sinister." To Massachusetts's Rep. Gerry Studds, it's "Orwelljan." And Minnesota Rep. Gerry Sikorski accuses it of nothing short of "treason."

What could possibly trigger such rage from these liberal Democrats? Why, it's the innocently named White House Council on Competitiveness, which is fast emerg ing as a major flashpoint in the regulatory battles between the Bush administration and Democrats in Congress.

The council, which is made up of highranking administration officials, exists ostensibly to help the administration speak with one voice on issues involving international competitiveness. But Democrats charge that, through its process of reviewing the routine-but-important regulations that enforce new laws, the council is secretly and probably illegally seeking to thwart the intention of those laws-especially the Clean Air Act-to benefit business interests.

"There's no legislative authority for what they're doing," asserts Rep. George Miller, the California Democrat who chairs the House Interior Committee. "It's a seri ous breach of the separation of powers."

To make their point, the Democrats have staged two lengthy congressional hearings and are planning a series of others; party leaders say they even hope to turn the council into an issue in the 1992 campaign. In addition, environmental groups are gearing up legal challenges to the council's basic authority.

Council aides and congressional Republicans scoff at all the fuss, and defend the group's activities as not only desirable but also almost completely immune from legislative attack. The Democrats' grousing, they add, won't deter it from broadening its influence in coming months on matters that range from civil justice to clean air to telecommunications.

'Broad-ranging' Mandate

"The council's mandate is broad-ranging." says Allan Hubbard, the council's executive director and a top aide to Vice President Quayle, its chairman. "We obvi ously want to have an impact." (What's more, riling Democrats on such nuts-andbolts issues as regulation is just what some GOP strategists think the vice president needs to do to dispel his reputation as a lightweight.

In the Name of Competition Either by itself or working with other agencies, the Council on Competitiveness has shaped such administration decisions as those to:

Block an EPA proposal to require recycling at municipal incinerators

Put off an EPA plan that would have discouraged the incineration of lead batteries, a source of toxic pollution

Soften a proposal to improve visibility in the Grand Canyon by sharply reducing sulfur dioxide emissions from a nearby power plant

Exempt old power plants that are updating their equipment from the full array of Clean Air Act requirements

Allow big factories and utilities to emit more pollution unless a state government objects within seven days

Open the way for more manufacturing of garments in the home

President Bush established the council soon after taking office in 1989. Besides Mr. Quayle, it includes White House Chief of Staff John Sununu, Budget Director Richard Darman, Treasury Secretary Nicholas Brady, Commerce Secretary Robert Mosbacher, Attorney General Dick Thornburgh and Michael Boskin, the chairman of the Council of Economic Advisers.

Last summer, President Bush gave the council its first concrete task, the same one he himself had spearheaded during the Reagan administration: pushing for dereg ulation. Any new rules that would impose more costs on business than they would generate benefit to the rest of society, he directed, should be held up and revised.

The major test of this mandate came with the enactment last November of the Clean Air Act. The Environmental Protection Agency has been obliged to develop hundreds of regulations to implement the act and other related laws, and the Council on Competitiveness quietly became a forum for appeals on any of the rules that were the subject of disputes between the EPA and other agencies.

Among other things, the council has been instrumental-either directly or through informal talks within the executive branch-in blocking a proposal to require recycling at municipal incinerators: put

ting off a plan to discourage the incineration of lead batteries, a source of toxic pol lution; and softening a proposal to improve visibility in the Grand Canyon by sharply reducing sulfur dioxide emissions from a nearby power plant. Pollution Issue

The council staff also helped fashion a rule that critics charge would allow big factories and utilities to unleash almost limitless pollution into the air unless a state government objects within seven days. (The EPA disputes the characteriza. tion, and says in any event that the rule isn't yet final.)

"The Council on Competitiveness has taken on the task of helping polluters block EPA's efforts to write Clean Air regulations with the unabashed purpose of protecting industry from the cost of regulation," fumes Rep. Waxman, who chairs the House environment subcommittee. Rep. Miller charges that council members "are quietly, secretly meeting with God-knowswho," and refers to the council as "a polluter star chamber."

Republicans rebut the attacks just as angrily, contending that the council's activities are well within the prerogative of the executive branch and shouldn't be subject to congressional meddling. "This is not an evil agency," says Rep. Norman Lent of New York, the senior Republican on the House Energy and Commerce Committee. "This is part and parcel of the executive agency of this government."

Rep. Lent and others say the council has clear authority to review regulations under the terms of Executive Order 12291, which was signed by President Reagan on Feb. 17, 1981. The order gave the White House's Office of Management and Budget, under the direction of the Bush deregulation task force, the authority to review existing and proposed rules. Today, the council's staff works closely with OMB's Office of Information and Regulatory Affairs to screen proposed regulations.

As a legal matter, decisions about regulations still rest with the agency of jurisdiction, and must be justified by the public record that already has been accumulated. But practically speaking, the council exercises considerable clout; though its deci sions can be appealed to the president, he generally doesn't overrule them. Ombudsman Role

Council officials dispute that its mission is to act merely as a business ombudsman.

They point out that business interests often war with each other, and are sometimes at odds with the council's own main motivation: to create jobs. "We try to get input from all sources," says David McIntosh, the council's deputy staff director. "At the staff level we meet not only with busi nesses, but also consumers, labor and envi ronmental groups."

In addition to deregulation, the council also is active in developing new legislation. Its backing recently helped Idaho GOP Sen. Steve Symms insert an amendment into the Senate-passed highway bill making it harder for the government to take pri vate property; critics contend the amend ment also could frustrate future enforcement of health and antipollution laws. The council also has set as a priority the defeat of an effort by Nevada Democratic Sen. Richard Bryan to toughen auto emission standards.

The council will soon be moving into other realms as well. It is at work on proposals that would make it harder for plaintiffs to collect punitive damages in civil cases, reduce the time it takes for govern ment approval of new drugs, open wetlands for commercial development and deregulate even further the telecommunications business.

All of which will undoubtedly outrage congressional Democrats even more. "Too much of our hard work is being ignored or reversed," charges Rep. Sikorski. "Some is being twisted, and some trashed."

THE ADMINISTRATION

By MICHAEL DUFFY WASHINGTON

William Reilly thought he had a deal.
The besieged chief of the Environ-

mental Protection Agency was certain Dan Quayle had agreed that any piece of land that was flooded or saturated with water for 15 consecutive days a year would constitute a "wetland" and deserved protection from private development. The next day Reilly received a call from Allan Hubbard, who heads Quayle's Council on Competitiveness, telling him the deal was off. Within days the council hatched a new plan, narrowing the definition of "wetness" by six extra days, satisfying a powerful coalition of farmers and builders and reducing America's wetlands by as much as 30 million acres.

Reilly was privately steamed. If George Bush persuaded Congress last year to pass most of his kinder, gentler legislation untouched, Quayle's Council on Competitiveness is spending much of this year making sure that the new environmental and health laws are as beneficial to business as possible. California Democrat Henry Waxman calls the council a "shadow government." Senator Albert Gore believes that the mysterious body allows Bush to pose as an environmentalist long enough "to justify a television commercial. Then, behind the scenes, the [council] guts the law."

Bush created the panel in 1989 but gave it new powers a year later, when he began hearing complaints from friends that his government was reregulating industries that the Reagan Administration had Sought to deregulate. Not long afterward. the President appeared before aides one

place to start

morning waving a newspaper clipping about reregulation and asking, "What's going on here?" Bush, who headed a task force on regulatory relief as Vice President, asked Quayle to review new regulations to make sure that costs would not outweigh benefits. Lacking a high-profile White House role at the time, Quayle jumped in with both feet.

This is no renegade operation: Bush, chief of staff John Sununu and Budget Director Richard Darman are fully apprised of the panel's activities. When such agencies as the EPA and the White House differ over how aggressively to implement a law, the council moves in to referee. Staffed by fewer than a dozen officials, who are, even by Bush White House standards, unusually conservative, the council regularly sides with business against the environment. Even Administration officials marvel at how powerful the body has become. "Because Quayle has Bush's total confidence," said a former Administration official, "nobody can touch those guys."

The council's favorite target is the 1990 Clean Air Act, which the White House backed but now fears will cost more than $26 billion to implement. Last summer the council asked the EPA to make more than 100 changes in proposed regulations for carrying out the act, changes that top EPA officials say undercut the law. The most controversial proposed change would allow polluters to unilaterally increase their emissions if states ignore a waiver request for more than seven days. "You could drive a big truck through some of those holes," said a top EPA official.

The council has also opposed an EPA

TIME. NOVEMBER 4, 1991

plan to require liners and leachate collection systems at all new solid-waste landfills. For nearly a year, the council argued that the plan was too costly, though other officials noted that in the past five years no city has permitted the construction of a new landfill without such equipment. The nation is short on landfills, and the rules for creating new sites are already three years behind schedule.

Hubbard, a gregarious Indiana entrepreneur who ran Pierre du Pont's 1988 presidential bid, points out that those who object to the council's rulings are free to mount challenges in the courts. Hubbard says the council's goal is to improve the nation's competitiveness, not to shelter industry from regulation. "The higher the cost of the regulation, the higher the cost of the product to the consumer," he explains. "Our whole effort is to protect the consumer and the American worker."

There's a little more to it than that. The council is potentially a political gold mine for Quayle, who often refers businesspeople with complaints about government meddling to his eager staff of deregulators. The council spearheaded Quayle's attack on lawyers and excess litigation last August, and is preparing to move beyond reviewing new regulations to tackling rules already in place. While Quayle's detractors dismiss the Vice President as silly and feckless. his shrewd handling of the council's affairs is just another sign that he is taking full advantage of his office.

For Bush, who in the midst of a sluggish recovery can neither pass out tax cuts nor launch spending programs to promote economic growth, the council is "the only game in town," an official said. "The one thing that can cause George Bush problems in 1992 is the recession." The council also exemplifies Bush's have-half approach to political problems. In 1992 he can run as an environmentalist while telling industrialists he's on their side too. -With reporting by Dick Thompson/Washington

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GOVERNMENT I

DAN QUAYLE,

Y

You won't hear any Dan Quayle jokes from Roland S. Boreham Jr. The Fort Smith (Ark.) chief executive, whose Baldor Electric Co. builds motors, has signed up for Quayle's campaign to simplify productliability laws. "The system is so doggone complicated and expensive, other countries are laughing at us," he says. "We're at a competitive disadvantage."

But is the Vice-President, whose shaky political reputation casts a long shadow over his role as head of the President's Council on Competitiveness, the guy to lead the charge? Boreham pauses. "To hell with that," he says. "When someone comes along, fighting back effectively, I say go for it." 'NO EXCUSE. The polls show that lots of folks still laugh at the boyish-looking Hoosier. But in Quayle's unsung role as deregulatory fanatic, he has found a niche in the city of long knives and short memories. "I do have a political agenda," Quayle told BUSINESS WEEK. "It's to have as few regulations as possible."

Those are words business loves. "I wasn't enamored when Bush chose him" as VicePresident, Hershey Foods Chairman Richard A. Zimmerman said

at a recent GOP fund-raiser in Harrisburg, Pa. "But Quayle's looking better." Adds Malcolm W. Gambill, president of Harsco Corp., a diversified manufacturer: "I'd probably vote for someone else for President. But the fact he's doing this is marvelous."

Normally, the job of screening regulations falls to the Office of Management & Budget. But President Bush has given the portfolio to the Vice-President. Since it was formed in 1989, Quayle's council has squelched dozens of regulations (table). Administration officials say he has been most successful in reining in the Environmental Protection Agency, less so in tempering the gung-ho Food & Drug Administration. His campaign against out-of-control legal fees got a boost on Oct. 23 when Bush directed all

government agencies to follow Quayle's guidelines for holding down legal costs.

It's all raising some hackles. "There's no excuse for this kind of meddling," fumes one high-level EPA official about Quayle's efforts to soften final regulations for the revised Clean Air Act. Ralph Nader is blunter: "Dan Quayle is just a tool of corporate interests. He's looking for something to do until Jay Leno and David Letterman stop making fun of him on late-night television. This is bad policy, and he's going to pay for it politically." If Senator John H. Glenn (DOhio) has his way, the payments will start soon. Glenn has scheduled hearings of his Governmental Affairs Committee to consider whether Quayle is encroaching on the freedom of independent regulatory agencies.

Hearings or no, Quayle has big plans for his council. His aides are readying a proposal to speed approval of new drugs by the FDA. A January white paper will encourage easing legal restrictions on the activities of telephone companies. And Allan B. Hubbard, the council's executive director, has ordered a cost-benefit analysis of all federal government regulations over the past 15 years,

though the methodology of such studies is widely considered suspect. ROOSTING CHICKENS? Quayle's effort to become the regulatory terminator may not win him friends inside the Beltway, but it makes sense politically. He is galvanizing executives who will soon be asked to open their wallets for 1992's Presidential campaign-and who will be a key source of funding for Quayle's expected 1996 White House bid.

Democratic strategist William Galston thinks there may be some risk to Quayle. "These decisions will have consequences five years from now, and chances are one of them will come a cropper," says Galston. But he adds: "Quayle is working quite effectively to position himself as the champion of the moderate conservative mainstream."

To many in Washington, Quayle's regulatory review is unglamorous work. But George Bush disagrees. Back in 1981, the then-Vice-President took on much the same role as head of Ronald Reagan's regulatory task force. The result: Bush collected a fistful of corporate chits that came in handy in his Presidential campaign. That's a lesson Quayle is keeping firmly in mind as he dreams about 1996.

DATA: BW

By Douglas Harbrecht, with Peter Hong, in Washington

NOVEMBER 4, 1991 31

Page 2

Environment Daily

Wednesday, November 20, 1991

by Guy Darst

An official of the Competitiveness Council denied Tuesday that the group exercises improper influence on agency decisions and pledged to protect Clean Air Act regulations from ideas rejected by Congress.

The official, David McIntosh, deputy director of the council and an assistant to its chairman, Vice President Quayle, said criticism of the council has been ginned up by the famous Washington "iron triangle."

The council is the means that President Bush has chosen to see that his policies are reflected in regulations, said McIntosh at a conference sponsored by the U.S. Chamber of Commerce.

For example, last year's amendments to the Clean Air Act require EPA to adopt about 70 major regulations, he said."What we're going to do is review those, following the president's directives that he doesn't want one additional dollar of costs imposed on industry beyond what was agreed to in the legislation," McIntosh said.

In the legislative process, "There were a lot of proposals by some of the extreme environmental groups that were rejected. Now what we're seeing in the writing of these regulations is those proposals are starting to surface again.... it's exactly those proposals we're going to be looking for."

He gave no examples of a proposal rejected by Congress but later put

forward in a regulatory proposal,

"I've discovered that the old political theory of an iron triangle is actually quite accurate," he said.

The "iron triangle" was first described by political scientists about 40 years ago as very resistant to change because it didn't operate in the spotlight of the news and members of each leg could count on sticking around while presidents came and went.

McIntosh described it as "unelected Hill staffers, some of the special interest groups like the environmental groups and self-appoint consumer groups, and then the bureaucrats who actually write the regulations."

"The iron triangle doesn't like it when we get involved in there and they called out the troops to complain about the council," he said.

Most complaints have involved two accusations: the council provides a secret process for business to overturn agency decisions that have gone against business, and its dictates to agencies are not written down.

As for improper access, "our doors are open to anybody to come in and tell us what to do," McIntosh said. Agency decisions are made on the public record and that record "defines what the council can choose from."

Just as senators may meet constituents and their staffs may talk with agencies during the legislative process without a public record, "the president

can have deliberations among his Cabinet, he can ask his staff to get information and that doesn't need to be put on the public record because you've got the rulemaking record," he said.

"So the answer to the charge that we're a secret government and need more sunshine is, what's good for the legislative also ought to be good for the executive," he said.

He noted that minor amendments to the air pollution permits eventually required of all industrial sources under last year's amendments. Critics have charged that industry got the council to force EPA to write a proposal permitting unlimited pollution increases with no public hearing if the state permitting authority failed to object on seven days' notice. EPA has since come forward with another proposal to let emission increases of less than 10% go forward right away, and public notice and state action later.

The law clearly gives EPA "great flexibility," McIntosh said, but it isn't clear whether public notice is required for a minor permit change and "we're going to refer this to the lawyers."

"If the lawyers come back and say the agency has that discretion, then it's Bill Reilly's decision, and it will be based on the public record. What our process does is allow Bill Reilly to get the views of his colleagues in the administration, and ultimately the president," McIntosh said.

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