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Mr. DUNKELBERGER. You can imagine what that would mean to a
small food processor or a retailer or small manufacturer. For them
it really does involve not the controller as in a large company, but the
president and the top echelons of the company to process these forms.

Senator MATHIAS. Yes. You have to assume that those 2,000 hours
are not all to be charged at the minimum wage standards.

Mr. DUNKELBERGER. I think that is fair to say. Many of them, of
course, resort to outside accountant firms, which I might say are
next to lawyers or equal to lawyers as far as benefits from the amount
of business generated by the program.

Senator MATHIAS. In that connection, the National Association of
Manufacturers (NAM) has published a survey of some of its mem-

bers, "The Impact of Controls," and I think we might put that in the record following Mr. Dunkelberger's testimony.1

Mr. DUNKELBERGER. I think that would be quite interesting.

Senator MATHIAS. Do you have any questions? Counsel has one or two questions.

Mr. RODGERS. Mr. Dunkelberger, do you think it is an anomaly that in our legal system the rules and regulations in automobile accident cases, the rules and regulations which govern obligations and rights of parties in such circumstances, are more clearly spelled out than they are in this case?

Mr. DUNKELBERGER. There is just no doubt in the world that you are getting there are so many other important segments of private activity that are regulated, in so much more detail than here. Of course, as to automobile accidents, the development of common law has contributed substantially to that, and we don't have the opportunity here for development of the common law, because we know this is only a temporary program-now in its 27th month. It is anomalous to my way of thinking that the most important area of regulation is the one that is least covered by detailed explanation of the require


Mr. RODGERS. In that regard, when the Cost of Living Council reaches decisions, say, in a series of exception cases, what kind of information do they make available about the rationale for those decisions?

Mr. DUNKELBERGER. I haven't seen any. John, have you?

Mr. HODGES. Well, the order usually denying the exception on the original go-around will give a brief explanation of the criteria which allegedly were used in reaching the decision. One of the problems, however, is that the criteria which are used are criteria which the company did not realize existed when it originally applied for the exception.

Now, when the exception is turned down, there is an opportunity for the company to apply again for reconsideration of the exception, but the problem with the request for reconsideration is that the criteria which are used on reconsideration are only whether or not the original decision was in error in fact or in law.

So the chances for reversing the decision on reconsideration, despite the fact of having a meritorious case, is cut down substantially.

In light of these factors, I certainly hope that the Cost of Living Council and Internal Revenue Service would make available to the public the criteria which they have developed internally for decisions, both in the area of exceptions and for compliance.

Mr. Dunkelberger recounted during his testimony a situation in which a company was faced with a notice of probable violation and presented several arguments on its own behalf and was informed by the IRS that there was an "internal Q&A" that went the other way. It is simply unfair from the point of view of the regulated, to have decisions being made based on criteria which are not available either to the regulated or the public. I hope that can be remedied.

Senator MATHIAS. Are you saying that Secretary Shultz should keep his cottonpicking hands off the club in the closet?

Mr. DUNKELBERGER. That puts it very well.

1 See p. 310.

One thing we might add concerning exceptions. If you look at it from the standpoint of where you are at any particular moment, the exception procedure is extremely important because there are a number of situations which cry out for some form of relief. It is my view, however, that a basic system of economic controls should not derive its fairness from an exceptions procedure. I am not a tax lawyer, but it is not my understanding that the Internal Revenue Code gives very general rules and then has administrative exceptions granted as a matter of grace. To my mind it is far better government to have more complex, more detailed rules, so that the exceptions procedure isn't necessary and the exceptions are really saved for the unusual situation that was not anticipated.

It is so easy to announce a general rule that is extremely onerous and to say, "Now, we will as a matter of grace decide whether to save your business' life or not." I don't think that is very good government, no matter how good the exceptions procedure is. On judicial review, if all the judges can look at is whether the Government should have provided an exception from its own rules, there is very little for the judge to get hold of. The exception procedure is important and you have to have it, but a far better approach is a much more detailed program and the bureaucracy that that necessarily entails.

Mr. RODGERS. Would you say, then, that really there are two steps that might be taken to help and that would be publication of guidelines and then some sort of system that published precedents on those occasions in which there is required interpretation?

Mr. DUNKELBERGER. I think that would be a reasonable substitute, Mr. Rodgers, for more detailed regulations. That is, if the exceptions were governed by criteria and guidelines that were spelled out, the company could then have a basis for deciding whether it was eligible for exception and someone reviewing that decision would have something to look at. I think that would be a reasonable substitute for more rules, but I really don't believe it is good practice to promulgate a strict general rule and to require firms to come in and ask for a favor if they want to do something that departs from that general standard. Senator MATHIAS. We thank you both very much for very helpful testimony. I am sure that it will contribute very much to the results of these hearings.

Mr. DUNKELBERGER. Thank you. We very much appreciate the opportunity to come.

Senator MATHIAS. The next witness will be Prof. Ernest Gellhorn, University of Virginia, not only a distinguished member of the faculty of the university, but also the author of a number of books on administrative law.

I understand you do not have a prepared statement.


Mr. GELLHORN. Mr. Chairman, I do not have a prepared statement. However, I am asking my students who assisted me in the preparation of my notes to come forward and to respond to your questions after I make a brief statement.

Senator MATHIAS. All right. I hope you introduce them for the record.

Mr. GELLHORN. I certainly will. I also would like to identify, Mr. Chairman, the names of some of the students who were not able to be here today because of other commitments, primarily classes.

Among the students who have helped me who are not here, first I would like to note Ms. Katherine Ott, second, Mr. Lee Unterman, and third, Mr. James Walsh, all of whom are second-year students at the University of Virginia Law School.

In addition, seated at the table with me today are Mr. David Larkin, a graduate student at the University of Virginia Law School, Mr. Gordon Thompson, a second-year law student at the University of Virginia Law School, and Mr. Terrence Harders; also, I believe, in the audience with me is Mr. Tim Smith.

Senator MATHIAS. Mr. Smith, if you would like to come up to the table, just pull up that chair. We don't make any rules about whether the chairs at the table have to have arms or not.

Mr. GELLHORN. We almost didn't make it here, Mr. Chairman, because on the way up we tried to buy some gas and the first gas station wouldn't sell us any, and we were a little concerned, but we did make it. However, I think this occurrence points out one of the serious problems and one of the reasons we are here.

Senator MATHIAS. Wouldn't sell you, or couldn't?

Mr. GELLHORN. I didn't inquire further. I was too concerned about getting gas, so I went on to the next station. I believe they could have sold gas to me because they were also selling other commodities, such as oil, windshield service, air and tires.

Though I don't have a prepared statement, I have some comments that I would like to make before I respond to questions; though, of course, I am happy to respond to questions at any time.

Initially, I would like to note some administrative law standards by which the administration of the wage-price control system might be measured. These are comfortable to me as an administrative law teacher and they govern most of our regulatory agencies.

First, of course, there is the dominant constitutional provision, the due process clause, which provides that no person may be deprived of life, liberty or property without due process of law. What this means generally is that there must be some regularized governmental machinery employed when Government acts or fails to act in a way so as to significantly affect a private person. The basic standard for trial type proceedings was set forth by the Supreme Court back in 1959 in the case of Greene v. McElroy: where governmental action seriously injuries an individual and the reasonableness of the action depends on factfindings, the evidence to prove the Government's case must be disclosed to the individual so that he has an opportunity to show that it is untrue.

Generally this constitutional standard has been fleshed out to mean that one has an opportunity to receive notice, to be heard, to have a decision made on a record, to have the reasons for that decision spelled out in the record and to have an opportunity for judicial review.

On the other hand, the constitutional command is a flexible one. Due process means that which is due in light of the circumstances and interests involved. The Constitution sets forth only a minimum

standard and the Congress has, via specific enabling legislation and the 1946 Administrative Procedure Act, spelled out additional requirements. One such requirement of particular note here is the provision that substantive rulemaking the establishment of agency policy on substantive matters-shall be preceded by notice and an opportunity for public participation by written or oral submissions.

As administrative law has developed, it has expanded beyond a concern, however, for formal trial type proceedings or formal rulemaking proceedings-technically, they are called "informal"; it now also seeks to cover informal administrative action. And to summarize a substantial amount of learning and law in the area, I would suggest that administrative law today seeks to focus on three specific areas or three interests. In identifying each, we seek to reach a balance; and it is by this standard that I would suggest my comments today measure the administration of the wage-price control system.

First is the question: Is the determination accurate? In other words, is the policy based on reliable facts to the extent facts are significant? Or, is the analysis correct?

Second, is the process fair and the results fair? For even if it is accurate, if it doesn't seem fair to the participants there will not be compliance or there will be frustration.

And third, since we don't have unlimited resources, of equally significant and sometimes overriding concern, is the process and the procedure efficient? Cost is really the ultimate question. Cost is involved in the constitutional issue, too, though that is often ignored.

So much for the basic legal standard. I now want to move quickly to an overview of the substantive policy, because I would suggest that the inadequacy of the substantive policy is the basis for most of the procedural problems which have occurred under the wageprice control system.

While I make no pretentions of being a professional economist, I think one who studies administrative procedure has to have some understanding of the economic system.

The wage-price control system is an attempt to respond to inflation (which is the relative increase in the price of goods-that is, a price increase without a quality increase).

Now, the usual corrective in a competitive economy is to allow prices to monitor consumer desires, allocate resources, and determine scarcity values. The difficulty is that when the Government increases the available supply of money as demand rises, there will be relative price increases without quality increases. And the wage-price control system is to some extent merely a throwing away of the thermometer. The demand is still present. Shortages will occur as a consequence. The basic underlying problem, in other words, is not treated by a wage-price control system. This, of course, accounts for the administration's suggestion-correct in my view-that the basic program must be a temporary one because it is not responsive to the underlying issues.

Perhaps in fact there is a better analogy than throwing away the thermometer because what occurs as I read it, or as I see it under the wage-price control system, is that we have a boiler (the economy) overheating, and instead of adjusting the boiler-for example, restraining the monetary supply and allowing, if necessary, unem


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