extending to influence both businesses and individuals. We are witnessing the most rapid and consuming growth of centralized control over economic and social activities in our history, and this expansion is becoming extremely costly to both business and the general public. The growth of federal regulatory activities is just plain staggering. There are no universally accepted definitions of what regulation entails, but a few general figures illustrate its momentum and meaning. As late as the middle 1950's, the Federal Government had only four areas of major regulatory responsibility: antitrust, financial institutions, transportation and communications. By 1977, there were 85 federal agencies regulating some aspect of private activity and over 116 different identifiable regulatory programs. Over one-fourth of these new agencies were created between the years 1969 and 1975. The thirty largest regulatory bodies employed more than 215,000 persons in 1977 and the growth in the total budget of all regulatory agencies was phenomenal-from $2.2 billion to fund federal regulatory activities in 1974 to $4.8 billion to support such activities in 1979, a 115 percent jump. One of the results of this rapid expansion has been a tremendous increase in the regulatory burden thrust upon the public and business. The costs regulation imposes on the public has reached truly astounding levels. Accurate calculation of total regulatory costs is impossible at present but several experts have developed rough estimates of such costs which range from $100 billion to $200 billion per year. Such abstract figures do not tell the whole story, however, for regulatory costs imposed upon business ultimately must be paid for by each of us as consumers. Recently, the Regulatory Council, a coordinating group created by the President, released its first "Regulatory Calendar", a listing of projected regulations to be promulgated by various regulatory agencies over the coming months. One hundred and nine new regulations filed by 20 agencies were included in the calendar. The projected costs to the consumer of many of these regulations is incredible. A proposal from one regulatory agency would increase the costs of a pick-up truck by $169 per vehicle. Another would raise the cost of a lawn mower by $35 and most disturbing of all, one regulation proposed would raise local water rates by $10 to $20 a year for each family! The fact is we can no longer ignore the costs and inefficiencies of our regulatory system. Until rather recently, the chief issue in debate over new government policies was whether it was legitimate for the Federal Government to do something at all. Today, the legitimacy barrier has fallen and government is involved in a tremendous range of business and private activity. Because of this fact, we must ask ourselves several important questions: What price must we pay for a given policy? What sacrifices and tradeoffs do we have to make to reach the goals we have set? What level of sacrifice and expense do the goals justify? Without asking these questions and seeking to answer them, we will never be able to slow the rising tide of government regulation. By concentrating on regulatory costs, I believe we can begin to gain control over a regulatory system which is inefficient, contains overlapping or duplicative programs and has become unaccountable to anyone. Obviously, there are necessary regulatory programs and areas of economic or social activity into which government should intervene. Recent studies have documented some of the benefits which result from regulatory activity including one analysis which concluded that various air pollution programs have resulted in benefits to the public estimated at nearly $5 billion a year. It is the unnecessary, wasteful and inefficient methods of carrying out regulatory programs which result in excessive regulatory costs. These are the costs we must focus on and for this reason we must concentrate on eliminating or streamlining federal regulations and requirements. There are two areas of regulation which I am particularly interested in exploring during these hearings. First, I am interested in examining specific methods or processes for minimizing regulatory costs and cutting back on the number of existing regulations. As I mentioned previously, procedures for making actual reductions in regulatory cost burdens are essential in my opinion. I have been working over the last few months on a proposal which would set a target figure by which regulatory costs would have to be reduced. A set review period and guidelines are also a part of the proposal. Such review-reduction processes are needed and I would like to see this issue explored. Second, the regulatory system is desperately in need of a mechanism for balancing the demands of competing and conflicting regulatory agencies and programs. There is also a need for more accountability in the regulatory process and for a method of establishing responsibility for the actions of the regulators. I have been seeking methods of giving the President, acting in concert with the Congress, the 50-941 0 - 80 - 2 responsibility for making the balancing choices which are becoming more and more necessary in our increasingly complex regulatory system. I believe this proposal raises the most fundamental question of all with respect to regulation: who is accountable for regulatory policy? Who controls the regulators? It is time that all elected officials in the Federal Government take responsibility for the actions of the regulators. This does not mean that the Congress should become involved in the day-to-day activities of the regulatory agencies. Rather, it means that major policy-making activities, which have national implications, should be subject to the control of the elected representatives of the people. And in this effort, I believe Congress and the President should work together for both institutions have the responsibility to make the bureaucracy accountable. My proposal will reflect these concerns and I would hope the issues raised by the ideas I have outlined could also be examined during these hearings. Mr. Chairman, I look forward to the testimony of the witnesses before us today and I will carefully review their statements and ideas. I especially would like to compliment the Business Roundtable and the American Bar Association for the work they have done on the problems related to federal regulatory activities. Both have completed thorough studies on various aspects of regulation and I want to take this opportunity to thank them for their efforts. The Nation can no longer afford the luxury of costly and inefficient government control. Progress so far in our efforts to gain control over regulatory programs has been slow. I hope these hearings can provide the catalyst for solid efforts to reduce the burdens and costs or regulation and gain control of the regulatory system. Senator ROTH. I would like to make a couple of observations beyond what has been already said. I think we all agree that regulatory agencies are the real growth industry of America. If you look at the facts back in the fifties, we had something like four principal regulatory responsibilities. By 1977, those 4 had expanded to 85 Federal agencies, regulating some aspect of private activity, and over 116 identifiable regulatory programs. I might point out, on the point that you made, Senator Pryor, that one-fourth of these agencies have been created after you left the House, in 1969 to 1975. Regulatory agencies employed 215,000 persons. The cost has grown to the Government. I am not talking about the cost to the private sector and the consumer. But the Federal cost has jumped from $2.2 billion in 1974 to $4.8 billion in 1979-a 115-percent jump. I want to applaud and congratulate, as Dave did, our distinguished chairman who is providing such strong leadership, and the ranking member, Senator Percy, for the leadership he is showing in this area. As we enter these hearings on the Ribicoff-Percy legislation, there are several things that I am going to be particularly interested in. But there are two points I would like to make right now. One is that I think we must, in adopting legislation, have some kind of action forcing mechanism in the legislation. I am not satisfied with procedures that are just merely going to require people to review and look. I want to see the number of regulations drop and drop substantially. I think we are going to have to use maybe the axtype approach and do something pretty strong to force the agencies to simplify and reduce the number of regulations in a given period of time. So that is point No. 1. Point No. 2 is that the regulatory system I think is desperately in need of a mechanism for balancing the demands of competing and conflicting regulatory agencies and programs. I believe one company has brought litigation because they really don't know where the Government stands in the matter of equal employment, because they are getting different signals, different rules, different regulations. We are going to have to have some accountability in the regulatory process. In many ways the regulatory agencies are antidemocratic. They are reponsible to no one. They make the rules; they judge; they decide who is guilty, who is complying with what; and they don't have to account to anyone-not to the President, not to the Congress. I think we need some kind of a balancing mechanism in the Government that will look over all of these agencies, all of which have been created for desirable goals and objectives, and try to determine how they could be balanced and reconciled. Mr. Chairman, if we are going to get this economy moving again, if we are going to get real growth, if we are going to do something about inflation, I think this legislation that you and Senator Percy and others have introduced is a sizable step in the right direction. But I must say that I think we have to make certain that the end result is action and not merely more study and procedures. Thank you. Chairman RIBICOFF. Thank you. Are there any other comments? Senator Levin? I am pleased to be here this morning to participate in this hearing. The regulatory process in this country has become unwieldy, costly, abusive, ineffective, unaccountable, and anticompetitive. Therefore, I am particularly pleased to be a cosponsor of the Ribicoff-Percy bill, S. 262, the Reform of Federal Regulation Act of 1979. This bill, like its predecessor in the last session, is founded on recommendations which were contained in this committee's very thorough six-volume study, for which I commend the chairman, the other members and the staff of this committee. I know that based on that foundation that S. 262 and S. 445 and other proposed regulatory reform measures along the way are going to receive very serious consideration by this committee and by this Congress. There is a new wind blowing in this country, and that wind is to try to make the regulatory process more efficient, more effective, less costly, less abusive, and more accountable to us. This committee today is embarking on hearings which are intended to take that new feeling that exists in this Congress and to try to turn it into legislation which will be helpful to all of us that have to deal with the regulatory process. I would ask that the balance of my statement, Mr. Chairman, be printed in full in the record. I will simply close by saying that I am delighted to start on this road this morning which I believe can benefit all Americans, regardless of their occupation. Chairman RIBICOFF. Thank you. [The opening statement of Senator Levin follows:] OPENING STATEMENT OF SENATOR CARL LEVIN The regulatory process has become unwieldy, abusive, ineffective and unaccountable. Therefore, I'm very pleased to be here today at the opening hearing this Congress on the important issue of regulatory reform. I'm equally pleased to be a co-sponsor of the Ribicoff-Percy Bill, S. 262, the "Reform of Regulation Act of 1979." S. 262, like its predecessor bill, S. 2490, is founded on recommendations contained in this committee's thorough and excellent six-volume "Study of Federal Regula tion," in particular, Vol. IV, "Delay in the Regulatory Process" and Vol. VI, a "Framework for Regulation." Based on this strong foundation, S. 262 deserves and will receive very serious consideration. Also deserving serious attention this morning is the recently released study by the business roundtable and the Arthur Andersen Co. of the Cost of Government Regulation on 48 Selected American Corporations. Although the study is limited to these 48 companies and to the regulations of 6 agencies, and does not measure net costs, i.e., gross costs minus benefits, it is a significant contribution to the overall measurement of the incremental costs of Government regulation. Its methodology deserves close examination by the Congress and the agencies. With regard to S. 262, it's my hope that the bill can be improved and strengthened during the hearing process we begin today. We're all concerned about the impact of regulation: we also need to be concerned about the impact of regulatory reform. We must be certain of course that the net effect of our efforts will be to reduce unnecessary regulation and speed up the decisionmaking process and not to increase the growing mountain of Federal paperwork. I also have other questions for which I'll be seeking answers during these hearings: What can we do to: Reduce delays in the issuing of necessary regulations? Discourage agencies from changing regulations in the middle of programs? Allow for increased flexibility in regulatory compliance, particularly for small business and local governmental units? Reduce inconsistent or duplicative regulations? Should a lower threshhold than $100,000,000 be adopted for the undertaking of a regulatory analysis of a proposed rule? Should the question of whether an agency uses a design or a performance standard in a proposed rule be reviewed by the agency in its regulatory analysis? Should the regulatory analysis be subject to judicial review-independent of the rulemaking? As part of the full administrative record? Will extensive reporting requirements of sections 644-645 deter agencies from reviewing more than one existing rule per year and deter the review of 100's or 1000's of other existing rules? Are oral testimony and cross-examination as significant causes of delay in agency proceedings as the "general hearing process" proposed in S. 262 suggests they are? Will this amendment to the administrative procedure act overly restrict such testimony and examination? Should the continual use of dilatory tactics subject a lawyer to agency disciplinary sanctions? Should the administrator of a restructured administrative conference have both renewal authority and authority to bring a complaint against an administrative law judge before the merit systems protection board? What should the functions and authority be of the restructured administrative conference? These are just a few of the questions I know we will thoroughly address during these important hearings we begin today. I'm pleased to be a co-sponsor of S. 262 and I look forward to working with you Mr. Chairman and the other members of the committee in shaping the most responsible and responsive regulatory reform legislation we can produce. Senator PERCY. Mr. Chairman, Senator Javits would want to be here to welcome Frank Cary, who is a valued constituent of his. Senator Javits will try to get over here, but he is in a markup right now. He also welcomes Mr. Millar. Chairman RIBICOFF. Senator Durenberger? Senator DURENBERGER. I will pass. Senator CоHEN. No statement. Chairman RIBICOFF. You may make your statement, Mr. Cary. TESTIMONY OF FRANK T. CARY, CHAIRMAN OF THE BOARD, INTERNATIONAL BUSINESS MACHINES CORP., AND CHAIRMAN OF THE BUSINESS ROUNDTABLE TASK FORCE ON GOVERNMENT REGULATION; VICTOR E. MILLAR, DEPUTY VICE CHAIRMAN OF ARTHUR ANDERSEN & CO., ACCOMPANIED BY MICHAEL E. SIMON, AND JERRY WALKER, PARTNERS IN ARTHUR ANDERSEN & CO. Mr. CARY. I have submitted a written statement for the record, Mr. Chairman. Chairman RIBICOFF. The entire statement will be placed in the record in full at the conclusion of your testimony. Mr. CARY. Thank you, Mr. Chairman. Mr. Chairman, members of the Governmental Affairs Committee: On behalf of the Business Roundtable, I want to express my appreciation for the opportunity to testify at these very important hearings. We are grateful for the initiatives which this committee and the Carter administration have taken on the subject of regulator reform, and we welcome the chance to address the issues raised by the chairman's bill, S. 262, and Senator Percy's bill, S. 445, the other legislation before you. The Business Roundtable established its Task Force on Regulation in 1974. In early 1978, as part of our effort, the Roundtable commissioned a regulatory cost study. The purpose of the study was to develop a suitable methodology for measuring specific regulatory costs. The results of that study have just been published, and we would like to spend a little time later on telling you about them. With me today to handle most of that task is Victor Millar, deputy vice chairman of Arthur Andersen & Co. Arthur Andersen was responsible for developing the methodology and for drafting the final report. Mr. Simon and Mr. Walker are both partfers in Arthur Andersen. Our testimony today will deal mainly with the provisions in title I and title III of S. 262 requiring economic analysis of proposed regulations and periodic review of existing regulations. The Business Roundtable is not prepared to comment in detail on the provisions in S. 262 which are aimed at expediting agency procedures. These provisions appear to have substantial and complex effects which differ from agency to agency. The Business Roundtable also takes no position on proposals to authorize financial assistance to organizations that might otherwise be unrepresented in agency proceedings. When our review of these proposals is completed, we will be happy to give you our views in writing. The Business Roundtable strongly supports the concept of regulatory analysis that is embodied in President Carter's Executive Order 12044 of March 1978 and in various bills before the committee. We reject the notion that economic analysis amounts to an indirect attack on the principle of Government regulation. The Business Roundtable supports the basic goals of Federal programs to achieve a clean and healthy environment, to assure a safe and healthy workplace, to provide for equal employment opportunity, and many other regulatory goals. |