think we see that in declines in air quality pollutants in many categories across the United States. I think you could point to that as

success.

I think we also see successes in the Federal-State relationships that have develop in surface water discharge systems. I think we could point to successes.

I think also we have heard today of growing tensions and the potential for some failures, and it is partly that which we hope to get to in the final phase. But I think your question does require looking across a lot of programs and see where we have won and where we have not, and maybe trying to draw some conclusions or themes from those successes and failures.

Chairman GLENN. In other words, we have two separate objectives here. We want to make sure we get the environment cleaned up, and we have a policy that says we are going to turn as many functions of the Federal Government back to State and local areas as we can. I do not necessarily quarrel with that second goal. I think we have had too many things fall under Federal control. But a lot of these problems were or are under Federal because of the State or local governments had or have not taken action. So we are caught on the horns of a dilemma. We want to turn back what we can, but we want to make sure that the ultimate goal of making the environment better is not made more difficult by this turnback of responsibility to the local or State governments. That is what I am getting at here, and I think that it is a bottom-line questionquite apart of whether we want more federalism or less federalism. We do want a cleaner environment, we know that.

We heard today that both small business and local government feel overburdened by Federal environmental regulations. That does not come as news. We have heard a lot of that before, all of us in public office get that all the time. EPA gets it, everybody else gets it; it is nothing new.

What other information would we look at to determine, based on your criteria, whether the allocation is efficient or fair at different levels of government? Are there any other criteria? You bring up some of the economic criteria in your report. Are there other criteria we should be looking at?

Mr. SCHWARTZ. I am sure there are. Economic criteria, I am sure you know, are only one set of guidelines. Certainly, the political questions of what level of government is going to be most responsive to both the costs and the benefits of environmental cleanup. Other criteria might include, as one would expect, health standards and other questions of ecological standards.

Our criteria are-and I do not want to claim that they are easy to measure, either, but perhaps more quantifiable than some of the other criteria one might use.

Chairman GLENN. I think we better get a grasp of the overall impact of Federal regulations-those from EPA and other ones that townships and communities and small entities of government are faced with. We might very soon reach a point where the regulatory burden in all these areas combined is so great that local communities are just going to ignore the law-

Mr. SCHWARTZ. I think that is

Chairman GLENN [continuing]. Because they do not have the wherewithal, the people, the volunteers who were supposed to take over, to pick up the load.

Mr. SCHWARTZ. I think you made-

Chairman GLENN. Is that a possibility, from your view of it?

Mr. SCHWARTZ. I think that is certainly a possibility and, from the testimony that I listened to this morning, you may find the buck being passed back up from the smaller townships up to the county level and then up to the State and eventually to the Federal Government. In fact, as I understand the history of the environmental movement, that in a sense is what happened, that initially the problems were being addressed locally and as time went by the problems got worse and the costs of cleaning it up got worse and it just kept getting bucked up the system. I think we may be seeing that again.

Chairman GLENN. What do you say in the CBO paper as to the Regulatory Flexibility Act? Do you suggest any changes to it?

Mr. SCHWARTZ. We do not specifically suggest any changes. We do address the Regulatory Flexibility Act in the sense that I think others addressed it this morning. The spirit of the Act I think is well taken and fully within the spirit of the criteria that we analyze in our paper. As we see it and others have, the problem is really in the implementation of what are very difficult decisions that do not fall well into these criteria.

Chairman GLENN. Do any of the staff have any questions?

We thank you. We will be having more questions for you, I am sure. We appreciate your cooperation in producing the working paper, and I understand it is released for public consumption. We appreciate your work on it.

What was your name again?

Ms. SUSSMAN. Frances Sussman.

Chairman GLENN. Frances, you did not comment this morning. You were the one who did a lot of the work on the report, as I understand. Do you have any comment on what your boss has said here this morning?

Ms. SUSSMAN. No, only

Chairman GLENN. At the peril of your job only, that is all.

Ms. SUSSMAN. Fortunately, I do not have to imperil my job.

Mr. SCHWARTZ. She did an excellent job on this and I would say that, while we sit up here and speak the words, it was really Frances who wrote the paper.

Chairman GLENN. I have not read it yet. I just got one copy of it here this morning, of course, and so I do look forward to going through it. We appreciate your work on it, and we will be looking at it and submitting more questions to you. As always, when we are dealing with CBO, we appreciate the prompt response we usually get. We appreciate it very much.

Mr. SCHWARTZ. Thank you.

Chairman GLENN. Thank you very much.

The Committee will stand in recess subject to call of the Chair. [Whereupon, at 12:45 p.m., the Committee was in recess, subject to call of the Chair.]

STRUCTURE AND PERFORMANCE OF THE

REGULATORY REGIME

MONDAY, OCTOBER 3, 1988

U.S. SENATE,

COMMITTEE ON GOVERNMENTAL AFFAIRS,

Washington, DC.

The Committee met, pursuant to notice, at 2:05 p.m., in room SD-342, Dirksen Senate Office Building, the Hon. John Glenn, Chairman of the Committee presiding.

Present: Senator Glenn.

OPENING STATEMENT OF CHAIRMAN GLENN

Chairman GLENN. The hearing will be in order.

Today, in the Committee's third hearing on the subject of regulatory reform, we will examine the process that coordinates and controls regulatory agency rulemaking focusing on Executive Order 12498. It was issued in 1985 and designed to extend regulatory review to the earliest stages of the regulatory process.

Executive Order 12498 complements the regulatory clearance process established in 1981 with the promulgation of Executive Order 12291. Under this earlier Order, proposed rules are subjected to a cost-benefit test and must be cleared by OMB, the Office of Management and Budget, before being published in the Federal Register.

Executive Order 12498 builds on that regime by granting OMB the authority to clear, on a yearly basis, intended significant regulatory actions, as well as those already underway.

There are clearly advantages to centralizing control over the regulatory process. One advantage of a front-end review is the coordination of rulemaking across agencies. By directing agency heads to submit annually their regulatory plans for the following year and then circulating those plans in the form of The Regulatory Program of the United States Government, OMB is able to reduce overlapping or conflicting rules.

The Regulatory Program of the United States Government is this compendium that I am holding up here for all of you to see. It details all the different regulatory procedures which the different agencies and departments have gone or will go through-in this particular case between April 1, 1988, and March 31, 1989.

Another advantage of the regime established by 12498 is that it encourages the development of regulatory priorities. With limited financial and human resources, it is vital that the Federal Government use those resources as wisely as possible.

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Indeed, agenda-setting and coordination were two recommendations this Committee made after an intensive study of regulatory policy in 1977.

Now, I hate to say so, but that was the last time that such a study was provided, prior to hearings that we have had this year. The aim of this hearing is to see how successful the current regime has been in achieving the goals we identified in 1977.

Now, I recognize, however, that the clearance process under Order 12498 creates numerous opportunities for abuse and delayespecially with the Order's extension of regulatory review at the pre-rule making stage. An open question, one I want to address in this hearing, is how much power should OMB have over executive agencies.

Some of the most important regulatory agencies are charged by their organic statutes to protect the public health and safety. The Senate confirms officials and the agencies retain technical personnel to see that these mandates are carried out.

We must insure that OMB does not over-step its bounds as a coordinator and facilitator of regulatory process and in so doing displace Congressional mandates of authority.

Documents and testimony from Senator Kennedy's Labor and Education Committee hearing on OSHA last April offers us an example of the influence OMB can bring to bear on agency regulations.

That hearing record suggests a battle between OMB and OSHA scientists over a number of important health standards. Those regulations included methods of compliance for permissible exposure limits; protection of health workers against infectious blood-born diseases, which is a known carcinogen; and a lock-out/tag-out rule drafted to protect workers from being maimed or killed by machines that they are in the process of repairing.

In these cases, it appears as though OMB used the 12498 review, in conjunction with the process established by Order 12291, to weaken regulations, as well as to delay timetables for their implementation.

Executive Order 12498 may offer other unique opportunities for abuse as well. Since the Order gives OMB the authority to clear regulatory actions before a rulemaking record is established, the possibility exists that rules are quashed in their infancy before they are subject to real public comment or have the opportunity to meet a cost-benefit test.

In the course of today's hearings I hope we can identify ways to keep the benefits of the current regime while eliminating opportunities for abuse. We will have a new president entering the White House in January, and I think it is all the more important for us to perform this kind of an assessment now. We hope it can be of guidance to the new Administration.

Today we will seek testimony from two panels. On the first panel we will hear from Joan Claybrook, President of the Public Citizen Litigation Group.

We will also hear from Richard Wegman, who, as a former staff director of this Committee, directed our 1977 study on regulatory reform, and Professor W. Kip Viscusi, from Duke University's Department of Economics.