107 cbtainable by private practitioners, it can be expected to become extremely difficult to attract and retain highly qualified attorneys to serve as administrative law judges at the current pay rates for that position. We therefore recorrand that S. 262 and S. 755 be revised to provide for such a separate pay schedule, as well as for the lifting of the present pay ceiling to Executive Level III for this position. Dace 64, line 11 Delete paragraph (2) and substitute: "(9) establish and maintain the Comittee on Oversight of the Administrative Law Judge Function.: Pace 66, line 24 In subsection (b) (1) add the following new sentence "At least two members of the Advisory Commission shall be active administrative law judges at the time of their appointment to the Commission." Comment In light of the major responsibilities and functions which S. 262 proposes for the Administrative Conference concerning the appointment and function of administrative law judges, we believe it is essential that the judges have substantial representation in the Advisory Committee on Oversight o Judges ACUS Advisory Commission Commission. We therefore propose that at least two of the nine Commission members be active administrative law judges. Senator LEVIN. The hearing is adjourned. [Whereupon at 12:35 p.m., the committee recessed, to reconvene subject to call of the Chair.] REGULATORY REFORM LEGISLATION FRIDAY, MAY 4, 1979 U.S. SENATE, COMMITTEE ON GOVERNMENTAL AFFAIRS, Washington, D.C. The committee met at 10:05 a.m., pursuant to call, in room 3302, Dirksen Senate Office Building, Hon. Carl Levin presiding. Present: Senators Levin and Percy. OPENING REMARKS OF SENATOR LEVIN Senator LEVIN. Good morning, everyone. The committee will now come to order. This morning the Committee on Governmental Affairs holds its fifth day of hearings in this Congress on the regulatory reform legislation before the committee. Today, we will be hearing testimony on S. 262, S. 755, S. 445, and S. 93 from two panels: One including representatives of the business community; the other, representatives of public interest groups. To allow time for questions, I will ask all of our witnesses to summarize their written testimony, if they would, in 10 minutes or less. We will insert the entire statement of each witness in the record. The pros and cons of the issue of public participation in agency proceedings should receive a full airing this morning. Other issues we may touch on today include the threshold and content of the regulatory analysis requirement, whether or not the regulatory analysis should be subject to judicial review, how the agencies short of judicial review can be held accountable for the quality of their analyses, whether the President should be authorized to intervene in the regulatory decisionmaking of the agencies, either or both executive branch and independent agencies, whether agency supenas should be more readily enforced. As we said at the beginning of these hearings, we are all concerned about the impact of regulation. We also need to be concerned about the impact of regulatory reform. We have to hope that the net effect of our efforts will be to reduce unnecessary regulation which so often bedevils us in our various occupations, to achieve more effective regulation in some areas, and to speed up the decisionmaking process. A major purpose of this bill is to require an economic impact analysis of proposed regulations. We must assure that this will be more than just a paperwork exercise. That would only worsen the problem that we now face. (955) I will now call on our first panel of witnesses: William McKinley, Jeffrey Joseph, Mark Schultz, and James McKevitt. I understand that Frank Swain is going to be filling in for Mr. McKevitt because he is going to be late. We welcome all of you. Is there any particular order of proceeding that you have agreed upon? If not, I would like to give a particularly warm welcome to my constituent, Mr. McKinley. Why don't we start with you. TESTIMONY OF WILLIAM L. McKINLEY, NATIONAL ASSOCIATION OF MANUFACTURERS, ACCOMPANIED BY RICHARD PATTERSON; JEFFREY H. JOSEPH, U.S. CHAMBER OF COMMERCE, ACCOMPANIED BY MARK SCHULTZ; JAMES D. "MIKE" McKEVITT, NATIONAL FEDERATION OF INDEPENDENT BUSINESSES, AND FRANK SWAIN, LEGISLATIVE COUN SEL Mr. MCKINLEY. Thank you, Mr. Chairman. I am William L. McKinley, vice chairman of Gerber Products Co. of Fremont, Mich. I am appearing before you this morning in my capacity as chairman of the Regulatory and Consumer Affairs Committee of the National Association of Manufacturers. Since you have received a copy of my formal statement for the record, I will summarize my statement at this time. The NAM is a voluntary organization comprised of approximately 12,400 member firms of all sizes from every State in the Nation. The NAM and its affiliate organization, the National Industrial Council, which has over 158,000 members, together provide consumers with approximately 80 percent of the goods manufactured in this country. While our members include many of the Nation's largest companies, almost 80 percent of our companies are small, employing fewer than 500 people. On behalf of the National Association of Manufacturers, I would like to thank you for this opportunity to appear before this committee to present the views of the NAM concerning the major regulatory reform proposals currently under consideration by this committee including S. 262, S. 755, S. 93, and S. 445. We are most gratified by the active interest which this committee and the administration have shown in the area of regulatory reform-an area which we must all agree deserves serious and immediate attention. The fact that the regulatory process has become unwieldy, ineffective, and unaccountable is hardly disputable. Excessive and duplicative regulation plagues the Nation's economy and the American people without relief. It is, perhaps the most pervasive aspect of our lives today. The cost which regulation imposes on the public and business has reached shocking levels. Precise calculation of total costs thrust upon the economy by regulation is virtually impossible at present, but rough estimates range from $100 billion to $200 billion per year. In addition, productivity growth since 1973 has run at one-third the previous growth rate in the postwar years. At the same time, the growth in Federal regulatory activities, as indicated by the 115percent increase in the funding of regulatory agencies since 1974, has been phenomenal. Budgetary figures for most agencies has tripled since 1970 and, in some cases, it has gone up from 7 to 13 times in the past 8 years. Figures cannot tell the whole story, and we have all heard numerous stories which clearly reveal the regulatory excess which has invaded our lives. A recent survey by the NAM of 266 business executives underscores this problem and reveals some startling statistics. In response to the question, "In your company, is the cost of meeting government regulations at all levels, Federal, State and local, a major burden, a fairly serious problem or not much of a problem?" Forty-eight percent responded "a major burden”; 46 percent said compliance costs were "a fairly serious problem"; and 6 percent responded "not much of a problem." The fact that we can no longer ignore the excessive burdens of ineffective regulation which are ultimately borne by the consumer is certain. As the government increasingly relies upon regulation to achieve public policy goals, the need for balanced, fair, and sound regulation becomes even greater. It is certainly not my intention to dispute the value of statutory regulation of certain aspects of private enterprise as a function of the Federal Government and necessary for the public interest. The practicality of such regulation is beyond doubt. But as regulatory programs are written, some have caused widespread, although generally unintended, results ranging from conflicting and duplicative rules to the negation of nation policy goals such as increasing productivity and controlling inflation. What is desperately needed today is a fair and reasonable system of regulation. The NAM vigorously supported and worked for the passage of the Airline Deregulation Act of 1978. We also support reform of the trucking industry to insure that our transportation system operates in the best interests of the majority of Americans. I believe that the fundamental issue which we are dealing with here is the question of accountability. I think we can all agree with this. Responsibility for the actions of the Federal agencies is the very heart of the problem. Increasingly, that responsibility falls upon our elected officials. With this in mind, I will direct my remarks mainly to the issues raised by the legislative proposals under consideration by this committee. The NAM sees methods for achieving accountability in the rulemaking process. These include, first, specific direction on the part of the Congress on the final results required by each piece of legislation passed by the Congress. This could be achieved either by more specific language in the legislation or, as a part of the legislation authorizing new programs or agencies, a provision stating the sense of Congress. This sense of Congress would specifically provide agencies and the public with information as to what the Congress expects the implementing agency to accomplish and what it does not want the agency to attempt. A regulatory analysis for all significant rules is our second point. Significant rules should include consideration of local and individual impacts such as economic sectors, geographic regions, industry, in addition to the national impact. The regulatory analysis should contain a statement specifically pinpointing the goals and objectives the proposed regulation is intended to achieve in quantifiable terms whenever possible. An economic analysis should also include the direct cost, but not limited to the paperwork burden, recordkeeping, capital expenses, labor and testing costs and insofar as possible indirect costs. Included in this analysis may be noneconomic results if the agency so desires, although such information is almost impossible to precisely measure and doubtless open to debate at this point. We do not feel that an economic analysis in any way undermines the purpose of regulation or the independence of any agency. Dollars are, after all, a finite entity. Those used in complying with regulations cannot, for example, be used to build new plants and create new jobs. Economic consideration of regulations should be given top priority in the development of all significant information. Alternatives to the proposal which would achieve the stated goals should also be considered and be subject to the same economic analysis. Third, third-party review of analysis prior to publication proposals and its alternates should be required. This third party should actually be two outside disinterested parties, representing both the executive and legislative branch of Government. The reviewing parties should be permitted to require an agency to reconsider an obviously defective analysis. We would suggest GAO or CBO and the OMB and another executive organization for this very important job. After third party review these analysis should be made available for public comment. We feel a 60-day comment period may not be long enough for insightful and thorough examination of the proposal and its alternatives. We would suggest 90. While these suggestions may actually increase rulemaking time up to 2 months, we believe that such a delay, when it occurs in the formulation of a rule, is warranted. Careful consideration of all the aspects of a rule in the early stages will prevent unforeseen problems later. Fair and sound regulation will be the result of an honest effort on the part of all parties to work together in the early stages of rulemaking. I submit that a 2-month delay is very little in relation to the time and effort required to correct unsound regulation. As for the final rule, the NAM believes a final regulatory analysis should be issued with any significant rule and should include, in addition to the same economic analysis required for the preliminary proposal, a full response to public comment. Most importantly, the NAM believes the final regulation issued should be the most cost-effective method of achieving the stated goal. Achieving the goal with the least waste of resources should be central to all rulemaking. Finally, we feel that agencies should be required to report to the appropriate congressional subcommittee or committee on the accuracy of the regulatory analysis within a period of 5 years after the effective date. This would help agencies see how well analyses are being conducted and help Congress judge the cost-effectiveness of a regulation and consider actions to correct any problems. JUDICIAL REVIEW NAM feels strongly that the regulatory analysis should be considered the basis for intermediate judicial review. Alternatively, it |