On the second panel we will hear from James Miller III, Director of OMB, Office of Management and Budget. Mr. Miller will be accompanied by Sheldon Plager, Administrator of OMB's Officer of Inforamtion and Regulatory Affairs, which is responsible for clearing executive agency regulations under the 12498 process.

I look forward to hearing their views. We will try to find the balance between making certain that all of the mandates of the law are carried out and doing so in the most expeditious way.

So, if the first panel would take their places, please, Ms. Claybrook, Mr. Wegman, and Professor Viscusi.

We welcome you all to the hearing today. Ms. Claybrook, if you would lead off, we would welcome abridgment of lengthier statements today so we get the main points and have as much time for discussion as we possibly can. In any event, your entire statement will be included in the record. Welcome to our hearing and we look forward to your statement.

TESTIMONY OF JOAN CLAYBROOK, PRESIDENT, PUBLIC CITIZEN LITIGATION GROUP, WASHINGTON, DC, ACCOMPANIED BY DAVID VLADECK, SENIOR ATTORNEY

Ms. CLAYBROOK. Thank you very much, Mr. Chairman, for the invitation to appear today. With me today is David Vladeck from our litigation group. He is a senior attorney and has litigated a number of cases involving the Office of Management and Budget interference in the rulemaking process.

As the Committee is aware, this Administration has centralized control of the administrative process in the Office of Management and Budget to an unprecedented degree. Executive Order 12498 completes the shift in the locus of regulatory decision-making begun by the first Executive Order of 1981, Executive Order 12291, from the regulatory agencies to the Office of Management and Budget.

Under these two executive orders and the Paperwork Reduction Act, OMB now exercise extensive control over the administrative process from start to finish and with this power OMB has managed to repeatedly cut back on health and safety regulations, both weakening regulations and delaying their issuance and it is in this area that Public Citizen specializes.

Executive Order 12498 plays a key role in giving OMB this control. Taken alone, the order accords OMB the power to shape the agenda of the Executive Branch agencies since it directs OMB to review on an annual basis each agency's policies, goals and objectives for the coming year and information concerning all significant regulatory actions underway or planned.

OMB may return part or all of a proposed agency regulatory program that it views as inconsistent with the Administration's policies and priorities, or out of line with the requirements of section two of the Executive Order 12291, namely that administrative decisions must be based on adequate information concerning the need for and consequences of proposed Government actions and that

1 See p. 360 for Ms. Claybrook's prepared statement.

agency priorities, "will maximize the aggregate net potential benefit to society when the societal costs and benefits are compared." With this control over the agency's budget, including an agency's resources for research, data gathering, surveys and other types of information development that are essential to doing these kinds of analyses, there is little likelihood that agencies will fight with OMB on any particular regulatory initiative.

But Executive Order 12498 cannot be examined in isolation. While it focuses on the development of an agency's priorities with Executive Order 12291 and the Paperwork Reduction Act, they give OMB enormous control over the final work product.

Under Executive Order 12291, all Executive Branch agencies must send proposed and final regulations to OMB for prepublication review. OMB can prevent an agency from publishing a final rule until OMB has given the agency its comments and the agency has responded to OMB's satisfaction.

Since the Executive Order neither imposes enforceable time limts for the completion of OMB review nor limits the number of times that OMB can disapprove the agency's actions, the order essentially gives OMB de facto veto power over agency rulemaking. OMB's authority over agency regulations is further bolstered by the Paperwork Reduction Act which givers OMB_authority over regulations that require collection of information. The Act confers on OMB the authority under certain circumstances to curb an agency's efforts to furnish itself with information if OMB concludes that the collection is not necessary for the performance of the agency's functions.

Taken together, these powers give OMB substantial if not decisive control over an agency's rulemaking process from start to finish. Under the two executive orders, OMB has the power to supervise the development of all regulations and under the Paperwork Act, can control the ability of an agency to gather information, which, obviously, can have a profound impact on the ability to carry out the substantive mission of the agency.

OMB's hegemony cannot be doubted as Jim Tozzi, the former Director of the Office of Information and Regulatory Affairs at OMB noted, "The Government works using three things-money, people, and regulations. The agency must get all of these from OMB.

When asked to name an agency that promulgated a regulation over OMB's objections, the administrator at that time, who is now Judge Douglas Ginsburg, responded, "I don't think that there is such an instance; no, none.' Or, as the current OMB director, James Miller, put it, "If you are the toughest kid on the block, most kids won't pick a fight with you."

The Executive Order established things quite clearly. Indeed, under this troika of authority, OMB review and approval is now required at least four times-four times-before a regulation can be issued and enforced; first, when the agency seeks authorization to place a matter on the regulatory agenda; second, when the agency publishes the notice of proposed rulemaking; third, when the agency publishes the final rule; and fourth, when OMB conducts its final review under the Paperwork Reduction Act.

At each juncture the agency bears the burden of demonstrating that its proposal is not only consistent with the statutory mission

assigned to it by Congress but also with the substantive criteria laid out in the executive orders, which mandate that agency rules must be consistent with the Administration's policy and meet a stringent cost-benefit criteria.

If in OMB's view the proposal fails to meets these conditions, the agency cannot regulate and it has no course at all except to withdraw its initiative. With so many opportunities to "Just say no❞ to a regulation, it is hardly surprising that OMB has managed to choke off all but a trickle of critical life-saving health and safety regulations.

Public Citizen has long voiced its opposition to OMB control over this process for three reasons. First, OMB now has the power to displace decision-making authority that Congress assigned to the agencies with their expertise, not to unaccountable economists at OMB. And incidentally, Public Citizen did a survey not long ago of the staff at OMB that do this review and found that most of them had very little, if any, expertise. Most were economists and most had never been involved in regulatory matters. Not only is this displacement unlawful, but in our view, it is bad policy. It makes little sense for untrained OMB bureaucrats to have the power to second-guess the highly technical judgments made by agency experts.

Second, OMB control is inherently undemocratic. Our administrative rulemaking process is a model of openness in the United States. The public has an unqualified right to participate in rulemaking and all agency decisions must be made on the basis of the public record. By contrast, OMB control is often exerted behind closed doors with no opportunity for public participation and often no public record of what influenced the decision. This kind of secrecy is an anathema to a democracy like ours.

Third, OMB control denies Congress its vital oversight role. Our Constitution rests on a system of checks and balances and the framers wisely placed a check in the President's exercise of his authority under the "Take Care" clause of Article II through the Congressional power to oversee the executive branch's work of law execution. But under Executive Order 12498 Congress will simply never know when an agency sought to develop a regulatory initiative but was blocked from doing so by OMB. The whole process generally takes place outside of the public view.

The Committee asked particularly about the potential for abuse for "rules in their nascent state" under the Executive Order 12498. In this critical respect, this Executive Order is far more insidious than its predecessor. Since Executive Order 12291 only applies to proposed and final rules-which are typically preceded by advance notices of proposed rulemaking and other public announcementsthe public at least has an idea of when OMB involvement leads an agency to shift its ground or to back away from taking any regulatory action. That is why Congress has been able to uncover numerous examples of OMB's displacement of agency authority.

For example, Congressional hearings and other sources have disclosed that OMB forced OSHA to delete portions of its standard governing worker exposure to ethylene oxide, Public Citizen filed a lawsuit in this case and eventually succeeded. OMB pressured OSHA into delaying and weakening its hazard communication

rule, another area where we sued. OMB forced EPA to withdraw proposed rules concerning the banning and phase-down of asbestos use and instead directed EPA to refer action in that area to other agencies, despite EPA's conclusion that its own action was required by the law. And there are many others.

Executive Order 12498, in contrast, operates wholly outside the public view. By definition, since OMB clearance is an indispensable pre-condition to even listing a particular issue on an agency's agenda, if OMB returned the proposed agency policy initiative under 12498, that would seal the fate of the initiative because this would occur before the agency had begun to gather enough facts to make its case.

Consequently, some-perhaps many-rulemaking initiatives will simply disappear and neither Congress nor the public will ever have a clue that the agency, if left to its own devices, would have explored the facts and considered taking regulatory action.

Finally, Mr. Chairman, the Committee requested our views about what future administrations ought to do in terms of structuring a regulatory review process. In our view, the first principle is that there must be a clear line drawn between the management functions of a regulatory review program, which can be quite valuable, and the usurpation of agency authority, which is unwise and unlawful.

Thus, I would endorse a role for OMB in coordinating the work of agencies that have overlapping responsibilities, but I would oppose any system that vested authority in OMB to substitute its judgment on substantive matters for that of the agency. And indeed, that is why Public Citizen fought so hard to stop the enactment of the regulatory reform package that the Administration sent up in 1981 because it would have put into law much of what we find in these executive orders and we thought that was bad public policy.

Moreover, the process needs to be simplified. Applying this Administration's own cost-benefit principles to regulatory review, the present system-which has at least four layers of review-is costly and bureaucratic without any benefit to the Nation. Regulatory review should be prompt and not the secret, time consuming openended process that is now the rule.

Attention must also be paid to the procedures under which OMB operates. The time has come to substitute sunlight for the shroud of secrecy that has masked most of OMB's regulatory oversight work. While we recognize that the Executive Branch generally must be allowed the freedom to exchange internal views off the record-and this is important-on matters affecting the development of regulations and setting an agency's priorities, OMB's comments should be a matter of public record and we should know where they stand.

All documents reviewed by OMB and all records of all contacts between OMB and anyone outside the Government should be placed in the public record just like they are when an agency meets with people outside the Government agency.

To the extent OMB wants to file comments with the agency, these comments should be a matter of public record, and Congress should overrule Wolfe v. Department of Health and Human Serv

ices, which held that records which revealed the extent to which a substantive delay in issuing regulations was attributable to OMB review were exempt from disclosure under the Freedom of Information Act. We think this is ridiculous.

Finally, as part of its review of the regulatory process, Congress should not overlook the Paperwork Reduction Act. The automatic sunset provisions of that Act, applicable to information gathering rules, added by the 1986 amendments, soon become operative and Congress needs to reexamine the wisdom of having information collection requirements such as the reporting of defective cars to the Government or adverse drug reactions that have to be reported, to have these lapse every 3 years. We would urge that this sunset provision be revoked.

Congress also needs to examine whether the Act warrants clarification with regard to whether OMB can exert substantive control on an agency's regulatory programs through its powers under the Paperwork Act. As this Committee knows, there has long been concern that OMB is over stepping its authority by interfering with an agency's substantive missions through disapproving key information collection requirements.

Just such an instance recently opened up in the courts in a case in which Public Citizen was a party involving the OSHA hazard communication standard. The United States court of appeals for the third circuit held that, "Nothing in the Paperwork Reduction Act suggested Congressional intention to allow OMB in the guise of regulating collection of information, the authority to second guess other Federal agencies with respect to the kinds of disclosure needed to accomplish the substantive policies entrusted to such agencies."

OMB disagrees with this holding and consequently it is likely that there will be more litigation over OMB's substantive powers under the Act unless Congress clarifies this issue.

That concludes my prepared statement, Mr. Chairman, and we would be happy to resond to any questions.

Chairman GLENN. Thank you very much. I think we will have all of our testimony first.

We are glad to welcome now Mr. Richard Wegman. I go back far enough on this Committee to feel that he should still be sitting back here as the staff director instead of out in front giving testimony. He did outstanding work on the Committee and was here during the tenure when our chairman was Senator Abe Ribicoff, another outstanding leader. I came on the Committee during that time.

So Mr. Wegman, we are glad to welcome you and welcome your testimony.

TESTIMONY OF RICHARD A. WEGMAN, PARTNER, WEGMAN AND HOFF, WASHINGTON, DC 1

Mr. WEGMAN. Thank you, Senator Glenn. It seems a bit strange to be sitting on this side of the witness table rather than on the

1 See p. 384 for Mr. Wegman's prepared statement.