The trend toward reform continues to grow, and it is hoped that this report will help contribute to it At this time, regulatory reform legislation addressing the cost issue is pending in Congress and it is hoped that this study will contribute to the development of this legislation. Each of these groups should benefit from detailed analysis of this study's results and continued application of its methodology in their work. Without a doubt, the recent trend in government regulation has been toward greater involvement of government in business activity. Government has imposed high cost regulations to achieve social goals and, as indicated in this study, the costs will grow. The best hope for reform lies in the changes in attitude that seem to be taking place toward regulation, both in the private and public sectors. Political leaders, business groups and private citizens in growing numbers are expressing the need for an improved regulatory system. No one can dispute the fact that regulations have resulted in some valuable and beneficial gains for society. Still, most agree there is much room for improvement. The objective of this study is to contribute to the body of knowledge necessary for making rational judgments in determining the best balance between regulatory goals and the costs the nation must bear in pursuing them. Chairman RIBICOFF. Mr. Ross and Mr. Smith, please. Again, gentlemen, I want to repeat what I said in my opening remarks. The committee is deeply indebted to you gentlemen and the American Bar Association for the very substantial contribution you have made to a better understanding of the problems of regulation. Now not only are we going to hear from you, but I want the opportunity of calling upon you gentlemen in the future for help, and Peter Bloch on the left, too. As I understand it, you are going to summarize your testimony, and the entire statement will go into the permanent record. Do you have a preference as to who should go first? TESTIMONY OF WILLIAM ROSS, HEAD, ADMINISTRATIVE LAW Chairman RIBICOFF. All right, Mr. Smith. Mr. SMITH. Thank you, Senator. My name is Richard B. Smith. I am a practicing lawyer in New York City and vice chairman of the American Bar Association's Commission on Law and the Economy. I am happy to respond to the committee's request to testify at the initial hearings on what we consider a very important bill. S. 262 indeed embodies the thrust of a number of our commission's recommendations. Of course, we generally support those provisions of the bill. The procedural provisions of S. 262 deal with matters that were considered at some length by our commission, and especially by a committee of the commission under the chairmanship of Judge Friendly of the second circuit and David Ginsburg. We understand that you will be holding further hearings on the bill and hopefully at a time when they will be able to appear. At that time we would be prepared to give detailed, precise and comprehensive testimony on the provisions of the bill, more than I will be in a position to give today. The Commission on Law and the Economy was formed by the American Bar Association and began its work more than 3 years ago out of a concern that the apparatus for Federal Government regulation of the economy was not working well and in fact it had become a pervasive national problem. Since lawyers have had a good deal to do with regulatory legislation, administrative agencies, and the representation of persons affected by such governmental agencies in the economy, we thought the organized bar had a responsibility to address the subject in a comprehensive fashion. Our commission is composed of 26 people from throughout the country. Its chairman is John J. McCloy, a lawyer-statesman known to all for his many public roles and many significant contributions he has made since and during World War II in the service of his country. The commission has many lawyers. It has four economists as its members. At least nine of us have had substantial prior Govern ment experience. We include law teachers and practitioners active in the representation of business, labor, consumer, environmental, or financial interests. Despite this wide variety of perspectives, we were able to obtain a general consensus, with only a few dissents, on a series of recommendations that bear a certain interrelationship. Those recommendations, 12 in number, are contained in an exposure draft report entitled "Federal Regulation Roads to Reform" which we issued in August 1978. I hope and believe that our study and report have been useful to your committee and staff. I know that our work has been greatly aided by the six-volume study that this committee staff has conducted on the purpose and current effectiveness of Federal administrative agencies. Your study, we believe, is an impressive contribution to the understanding of Federal regulation in the 1970's. Quite frankly, how coincident a number of the viewpoints are which emerge from these relatively simultaneous efforts, one conducted in the Congress and the other in the private sector. It appears to me, Mr. Chairman, that the content of the committee's study and certainly the thrust of our commission's report lead to the conclusion that there are several necessary roads to regulatory reform. Before turning to the provisions of S. 262, which can be looked upon as one road, we would like to briefly mention some additional roads. One, of course, is for Congress to compel the elimination of counterproductive regulations and administrative functions that have outlived their usefulness. The deregulation of particular parts of the economy and the implementation of meaningful sunset reviews, each the subject of separate bills pending in the Congress, are vital elements in this program. Our commission's recommendations on those subjects have already received approval of the House of Delegates of the American Bar Association. Another road which the commission thinks important is to find a satisfactory mechanism for the reconciliation of the overlapping jurisdictions of the vast number of specialized regulatory agencies now in existence. We should find a process for balancing the specialized goals within national priorities. Our commission's recommendations on that subject will be submitted to the house of delegates of the bar association in August of this year. Attached to my statement is a copy of our 12 recommendations. In the balance of my oral statement I will refer only to those reflected in S. 262. Our fourth recommendation calls for the preparation of a regulatory analysis. That is a key element in title I of S. 262. We believe that such a requirement could be imposed by Executive order at least with respect to agencies within the executive departments, as has been done. To the extent an enabling statute is required to impose such a requirement on independent agencies, the commission favors the enactment of such a statute. While we shall undoubtedly have detailed comments on a specific regulatory provision of title I, the general requirement of the regu latory analysis contained therein is certainly consistent with the thrust of our commission's recommendation. I would point out that the house of delegates has not yet acted on that recommendation of the commission. But all the other recommendations to which I shall refer have been approved by the association. The commission's sixth recommendation is to amend the Administrative Procedure Act to provide for what we call a modified procedure. The essence of a modified procedure is to introduce flexibility and expedition into administrative proceedings by identifying issues early and limiting formal trial-type hearings to the specific factual issues or questions of expert opinion. This, of course, is one of the important elements of title II of S. 262. The first three findings in section 201 are substantially the same as the conclusions reached by the commission. The provisions of the bill amending 554(b) and 554(e) of the Administrative Procedure Act clearly appear to move in the same direction as the commission's recommendation. I am sure we shall have further comment on the specific provisions when we testify again. Our commission's seventh recommendation is to encourage agencies to make greater use of informal rulemaking and, when there are formal hearings, to have presiding officers use their existing powers to require written submissions when that is not prejudicial to a party, examine witnesses personally, set time limits for proceedings, make increased use of official notes, and rule on summary judgment motions. Title II of S. 262 would add a new section 554(c) to the Administrative Procedure Act specifically designed to enhance the authority, and I would add the responsibility, of a presiding officer to act generally in the manner the commission recommends. Our eighth recommendation is to modify time consuming intraagency appeal procedures so as to permit agencies to delegate final authority to presiding officers or to staff appeal boards, subject to discretionary review of major policy issues or for clear error. That subject is addressed in section 205 of the bill and clearly moves in the same direction. The commission's ninth recommendation covers financial assistance to certain participants in administrative proceedings. That concept is reflected in a power given to a reorganized Administrative Conference by title IV of S. 262. The commission's 10th recommendation is to encourage agencies to establish policy consultation boards within the procedures of the Advisory Committee Act as we think it should be amended for that purpose. This recommendation has not been reflected in S. 262, although it might have some relevancy in our view to the concept expressed in title I of an agenda of regulatory priorities. The commission's 11th recommendation has two elements. First, to require agencies to establish management procedures to eliminate wasteful or duplicative procedural steps; and to establish deadlines for proceedings; and to enforce such deadlines. Second, to require an audit of an agency to determine compliance with these three requirements and to empower a restructured and strengthened Administrative Conference to carry out such audits. I am pleased that all of the elements of our 11th recommendation have found their place in S. 262 and indeed have been amplified. Title I's requirement of an annual report on regulatory activities has what at first reading are interesting ideas for requiring an agency to face up to congested calendar conditions. Title I also requires an agency to establish guidelines for completing agency deadlines and is generally consistent with the commission's recommendations. Title IV of S. 262 would reorganize the Administrative Conference and give it substantially expanded functions. This is an extremely interesting provision of the bill. While the audit concept recommended by the commission might be read into the functions that would be given to the conference by the bill, I am not satisfied at this point that it is explicit enough if the sponsors of the bill intended such a function to be carried out. I would hope that would be the intention. The conference is given clear authority in the bill to obtain any information to carry out its functions. Nonetheless, it would seem preferable to make explicit the conduct of the audit function. If I might draw on my personal experience for a moment, for I served for 3 years as a member of the Council of the Administrative Conference, I think the time is ripe to transform the functions of that small agency, to give it more power of implementation. I think the conference has benefited from what heretofore has been essentially a study role. But I think the time has come when it should move from study and analysis, which has been of an extraordinarily high quality, to more of a monitoring and implementing capacity. I personally think it is the best situated agency in the Government to carry out that function. I would believe and hope that it could do so without vastly increasing its size. I would particularly call your attention to our commission report's brief discussion of the Administrative Conference in this respect. You will also see that we had a somewhat different preliminary thought about the governing body of the conference. Our 12th and last recommendation, as gratuitous of Senator Percy's return, is to support a limited form of sunset legislation. S. 262 does not, of course, deal with that subject, except interestingly it does speak of what might be called a minisunset with respect to particular agency rules. I refer to title III of the bill which would require agencies to make an annual review of at least one rule in order to determine whether its continuation is in the public inter est. The standards which are specified both for selecting which rule or rules to review and for deciding whether or not to rescind an outstanding rule are not too dissimilar from standards we would like to see applied in the larger legislative sunset reviews that are the subject of our recommendation. I note that title III leaves the selection of which rule or set of rules to review to the agency itself, with monitoring by the Congressional Budget Office. The thrust of our commission recommendations on sunset legislation, combined with the thrust of our recommendation on the need for a balancing mechanism, would suggest also giving the President the power to compel an agency to |