REGULATORY REFORM LEGISLATION

THURSDAY, MAY 3, 1979

U.S. SENATE,

COMMITTEE ON GOVERNMENTAL AFFAIRS,

Washington, D.C.

The committee met at 10:20 a.m., in room 3302, Dirksen Senate Office Building, Hon. Carl Levin presiding.

Present: Senators Levin, Sasser, and Percy.

Senator LEVIN. The committee will come to order.

This morning the Committee on Governmental Affairs resumes its hearings on major regulatory reform legislation that is before it, including S. 262, S. 755, S. 445, and S. 93.

Today we are going to be hearing testimony on these bills from Senator Gaylord Nelson, from a distinguished administrative lawyer, and from two panels of administrative law professors and administrative law judges. Tomorrow we will hear from representatives of business and the public interest community.

To let everyone be heard and to allow time for questions, I will ask all of our witnesses to summarize their written statements in 10 minutes or less. Without objection, the entire text of all prepared statements will be inserted in the record as if read.

The focus of this morning's hearing is on the problem of regulatory delay and proposed amendments to the Administrative Procedure Act. These provisions, including modified expedited hearing procedures and expansion of agency subpena authority, are the most extensive amendments to the Administrative Procedure Act since it was enacted in 1946. We will also hear testimony today on proposed changes in the selection, evaluation, and removal of administrative law judges. Though largely technical, these provisions raise important procedural issues, particularly in view of the fact that, in the words of the General Accounting Office:

Federal Executive departments and agencies process a larger case load than the United States courts, affect the rights of a larger number of citizens and employ twice as many administrative law judges as there are active judges in Federal trial

courts.

The issues we examine today, however we finally resolve them, are therefore, important for both the fairness and efficiency of the administrative process and for the overall quality of administrative justice.

Our first witness today is Senator Gaylord Nelson. We are delighted to welcome Senator Gaylord Nelson, distinguished Senator from Wisconsin and chairman of the Select Committee on Small Business, of which I am delighted and honored to be a member. Senator Nelson, you may proceed.

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TESTIMONY OF HON. GAYLORD NELSON, U.S. SENATOR FROM THE STATE OF WISCONSIN

Senator NELSON. Mr. Chairman, I apologize for being delayed. We were in markup in the Small Business Committee, and I have another appointment so I will be brief. I will ask that my full statement be printed in the record.

Senator LEVIN. It will be so printed.

Senator NELSON. S. 93, entitled the "Regulatory Procedures Improvements Act of 1977," was introduced by Senator Eagleton and myself earlier this year. The key elements in the bill are:

One, a statement that it is the intent of Congress that agencies take the cost of complying with a proposed regulation into consideration prior to the promulgation of the regulation.

Let me say, Mr. Chairman, this bill has many similarities to Senator Ribicoff's bill which is also pending before the committee. Two, a requirement that regulatory agencies publish a notice of justification of their need to regulate a specific matter or issue so as to avoid overlapping and duplicative regulations, which occur between agencies and departments with great regularity now.

Three, a requirement that regulatory agencies publish a notice of justification if an agency uses a design standard stipulating how a goal is to be achieved rather than a performance standard stating only that a goal must be achieved. The Environmental Protection Agency is already now starting to do something similar to this. In other words, from Congress' viewpoint, when we regulate, we are interested in achieving the objective and not having the bureaucracy establish a series of requirements on how to achieve the objective, since first, they, many times, aren't qualified to do so, and second, in many instances, it doesn't matter. It is much better to leave that flexibility up to those businesses who are out in the field to implement the objective in the most efficient way.

Four, a requirement that regulatory agencies perform an economic impact comparison of proposed regulations in any time when they breach a $100 million cost threshold nationwide, with alternative means of achieving the same specified goal. The committee will have to decide whether the $100 million or some other figure is the right threshold amount to trigger this provision.

Five, a sunset provision for both current and future economically significant regulations. In other words, the bill simply provides that an economically significant regulation should have a termination date and reviewed for its effectiveness before the authorized agency determines whether it should be reissued.

Six, paperwork impact provisions requiring agencies to determine, prior to issuing a rule, the paperwork cost for the private sector to comply with the rule.

It is interesting, I might point out, to take an indepth look at the paperwork issue. We have had some interesting experiences in this area. For example, the Small Business Committee, through the efforts in particular of Senator Tom McIntyre, created a Paperwork Commission. One of the things which both the Paperwork Commission the committee we reviewed was the filing of form 941, the Social Security Withholding Report. We argued that business should be required to be filed only annually, because, why should an employer, four times a year, list the names of every employee,

the social security numbers, and all the rest of the details required by the form when once a year is enough. That was the first recommendation of the Paperwork Commission. It was adopted and is now in effect. By careful computation it saves a pile of paperwork 10,500 feet high that used to come into Washington, totally unnecessary paperwork.

We also intend to introduce legislation on the W-2 form. Each year there are some 65 million job changes, and, according to the National Society of Public Accountants, about 56 million of the W-2 forms for these people are lost. By law, they must be issued a W-2 form. That means that workers are forced to seek duplicate W-2's to prepare their income taxes. The accountants advise us that it costs $5.25 to produce each duplicate for a total cost of more than $300 million.

Each duplicate represents an original and 5 copies for a grand total of 336 million pieces of paperwork each year. That makes a pile of W-2 forms more than 62 miles high that are uselessly made out at a cost of over $300 million.

The Government is imposing too many of these types of paperwork requirements on the private sector. My own view is-and I have said this to the Vice President, that the President ought to issue by Executive order a requirement that within 12 months' time every agency of the Government reduce its paperwork by 25 percent or file a detailed statement explaining why they cannot. I have legislation pending before this committee that would do that. I think it could improve the information flow to the Government of the United States and reduce the paperwork cost to the private sector.

So in any event, the paperwork impact proposed in S. 93 is a modest measure which would just require them to compute what is the cost of this proposed paperwork to the public.

The Small Business Committee has also looked at another example of excessive reporting requirements. For many years the law has contained a provision that a differential rate of pay could be paid to a full-time student. Not many people use it. We took a look at the reporting requirements. In order to qualify, the employer had a total of 71⁄2 pages to deal with, part of it instructions, the rest of it questions. We went through the form in some detail. I wrote a letter to the Secretary of Labor and said we saw no sense in the form and that the necessary information could be provided by answering just a few questions on a postcard. The Secretary wrote back and agreed with me. We reduced about 90 percent of the paperwork on this one form alone.

So you could pick up any paperwork you want, with various exceptions, and much of it, perhaps as much as 75 percent is unnecessary and it costs billions and billions of dollars. I think this measure in S. 93 is of great importance to the country and to the business world. It is important to the question of inflation and cost of business. Excessive paperwork requirements are a principal factor in the frustration on the part of people and are really a totally unnecessary waste of the taxpayers' time and money, to say nothing about the rate at which we have to cut down the forests to keep up with production of paper.

Mr. Chairman, I would ask the balance of my statement, my letter to the Secretary of Labor, and the form and postcard discussed be printed in the record, and I appreciate the committee giving me the time to come and make my appearance.

Senator LEVIN. We appreciate your taking the time. Your statement will be printed in full.

One of the interesting aspects of S. 93 and other bills is the requirement of justification when design standards are used. Whatever version we finally pass, I would hope we take a good hard look at your recommendation relative to requiring justification or explanation for design standards. I think it is an important addition to whatever bill we pass.

Senator NELSON. Yes, there may be times when the design standard may be necessary. But I think the objective should be to require only a performance standard, and if then a design standard is assumed to be required, make them post it in the Register and get public comment and see whether or not the agency is correct. That would probably cut off on the percent of the design standard regulation.

Senator LEVIN. Thank you again for your testimony, Senator. Senator NELSON. Thank you.

[The prepared statement with attachments of Senator Nelson follow:]

PREPARED STATEMENT OF SENATOR GAYLORD NELSON

Mr. Chairman and Members of the Committee, I am pleased to testify before you today on S. 93, the Regulatory Procedures Improvements Act of 1979, which Senator Eagleton and I introduced earlier this year.

The key elements of the bill are:

(1) A statement that is the intent of Congress that agencies take the cost of complying with a proposed regulation into consideration prior to the promulgation of the regulation;

(2) A requirement that regulatory agencies publish a notice of justification of their need to regulate a specific issue so as to avoid overlapping and duplicative regulations;

(3) A requirement that regulatory agencies publish a notice of justification if an agency uses a design standard stipulating how a goal is to be achieved rather than a performance standard stating only that a goal must be achieved. The Environmental Protection Agency is already starting to do something similar;

(4) A requirement that regulatory agencies perform an economic impact comparison of proposed regulations which breach a $100 million cost threshold test, with alternative means of achieving the same specified goal;

(5) Sunset provisions for both current and future economically significant regulations; and

(6) Paperwork impact provisions requiring agencies to determine, prior to issuing a rule, the paperwork cost for the private sector to comply with the rule.

The bill has been endorsed by organization's representing over 4 million small businesses including the National Small Business Association, the Small Business Legislative Council, the Outdoor Power Equipment Institute, and the Smaller Business Association of New England.

In many respects, the goals and objectives of this bill are similar to those of Senator Ribicoff's Reform of Federal Regulation Act.

Millions of Americans are finding themselves trapped in the middle of wrangling by federal bureaucrats over the enforcement of laws through regulation. For instance, meatpacking plants need stainless steel or tile surfaces to help them comply with Department of Agriculture food-handling standards. These surfaces, however, are highly reflective of sound and may cause a plant to exceed OSHA's noise standards.

By any measure, regulation has become a growth industry, particularly in the last decade. In 1978 alone, the Federal Government published 55,000 pages of regula tions, compared to 20,000 pages in 1970-a 275 percent increase. The number of

regulations has increased geometrically. Unnecessary regulation has reached the point where it is stifling business, frustrating the public and undermining its own credibility.

We do not and should not get rid of all regulation, just bad regulation.

By increasing the cost of doing business, unnecessary regulations hobble our efforts to curb inflation as well as our efforts to promote economic growth and create jobs. Although none of us will receive a bill for the unnecessary regulatory costs we must pay, we will nonetheless pay them through increased taxes and higher consumer prices.

Yet, nobody can suggest that regulation has not been the moving force in helping the nation to achieve laudable and necessary economic and social goals:

Safety packaging requirements have helped produce a 40 percent drop in the ingestion of poisons by children over a four-year period.

The General Accounting Office has reported that federal motor vehicle safety regulations were responsible for saving 28,000 lives between 1966 and 1974.

According to Henry Ford, there is no doubt that the law requiring greater fuel economy in motor vehicles has moved us faster toward energy conservation than competitive, free-market forces would have done.

Environmental regulations have helped to substantially improve air and water quality.

There is no doubt that government has a responsibility to regulate activities affecting health and welfare to ensure that they are in the public interest.

The question is not whether government should regulate but how and when it should regulate.

We need to get the government out of the business of issuing inflationary, inefficient and unnecessary regulations. But, we have to avoid delaying or prohibiting the implementation of necessary regulations. Regulations must be made more responsive to the nation's needs, not simply abolished. That is what the Regulatory Procedures Improvements Act would do.