<DOC>
[109 Senate Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:32351.wais]
S. Hrg. 109-955
NOMINATION OF SUSAN E. DUDLEY
=======================================================================
HEARING
before the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
SECOND SESSION
ON THE
NOMINATION OF SUSAN E. DUDLEY TO BE ADMINISTRATOR, OFFICE OF
INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND BUDGET
__________
NOVEMBER 13, 2006
__________
Available via http://www.access.gpo.gov/congress/senate
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Committee on Homeland Security and Governmental Affairs
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COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio CARL LEVIN, Michigan
NORM COLEMAN, Minnesota DANIEL K. AKAKA, Hawaii
TOM COBURN, Oklahoma THOMAS R. CARPER, Delaware
LINCOLN D. CHAFEE, Rhode Island MARK DAYTON, Minnesota
ROBERT F. BENNETT, Utah FRANK LAUTENBERG, New Jersey
PETE V. DOMENICI, New Mexico MARK PRYOR, Arkansas
JOHN W. WARNER, Virginia
Brandon L. Milhorn, Staff Director
John K. Grant, Professional Staff Member
Michael L. Alexander, Minority Staff Director
Adam R. Sedgewick, Minority Professional Staff Member
Trina Driessnack Tyrer, Chief Clerk
C O N T E N T S
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Opening statements:
Page
Senator Collins.............................................. 1
Senator Akaka................................................ 2
Senator Warner............................................... 4
WITNESS
Monday, November 13, 2006
Susan E. Dudley to be Administrator, Office of Information and
Regulatory Affairs, Office of Management and Budget:
Testimony.................................................... 6
Prepared statement........................................... 27
Biographical and professional information.................... 29
Letter from U.S. Office of Government Ethics................. 48
Responses to pre-hearing questions........................... 49
Additional responses to pre-hearing questions................ 67
Responses to post-hearing questions.......................... 101
Additional responses to post-hearing questions............... 112
Additional support and non-support letter and information for
the record................................................. 127
NOMINATION OF SUSAN E. DUDLEY
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MONDAY, NOVEMBER 13, 2006
U.S. Senate,
Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 2:32 p.m., in
room SD-342, Dirksen Senate Office Building, Hon. Susan M.
Collins, Chairman of the Committee, presiding.
Present: Senators Collins, Warner, Levin, Akaka, Carper,
and Pryor.
OPENING STATEMENT OF CHAIRMAN COLLINS
Chairman Collins. The Committee will come to order.
Good afternoon. Today, the Committee will consider the
nomination of Susan Dudley to be the Administrator of the
Office of Information and Regulatory Affairs at the Office of
Management and Budget. With the nominee to lead OIRA before us,
this Committee will continue a longstanding debate: When should
the government regulate and when should government rely on
market forces to produce desirable outcomes?
Regulations affect virtually every part of our lives. They
make us safer and healthier. They help keep our air and water
clean. They protect consumers from abusive practices. At the
same time, excessive regulation can impose real burdens, from
mere inconvenience to significant costs. The government must
consider these trade-offs as it deliberates the need for and
the extent of regulations. How the government weighs competing
interests often depends in part on the methodology used to
calculate costs and benefits, on the accuracy of the data that
informs decisionmakers, and on the way alternative regulatory
approaches are developed and compared.
OIRA plays a significant role in the Federal rulemaking
process. OIRA is one of those alphabet-soup agencies that few
people would recognize. Its lack of name recognition, however,
contrasts with the impact that its work has on the lives of all
Americans. The office was created by the Paperwork Reduction
Act of 1980 and has specific statutory responsibilities, such
as reviewing the amount of paperwork generated by Federal
agencies and assessing the costs and benefits of Federal rules.
For the past 25 years, OIRA has also been responsible for
reviewing the substance of proposed and final rules before
agencies publish them in the Federal Register. The agency staff
thus plays an important role in the rulemaking process. They
advise agencies on an informal basis as regulations are
developed and formally review proposed rules to ensure that
proper cost/benefit principles have been followed.
Let me be clear. Technically, OIRA does not approve or
reject regulations. Individual agencies must ultimately decide
whether or not to accept OIRA's suggested changes or proceed
with the publication of a rule as drafted by the agency. But
OIRA has significant influence over the regulatory process. Its
officials ask some important and sometimes challenging
questions, such as: Is the science behind the regulation sound?
Do these cost/benefit calculations make sense? Is this
regulation the best alternative to achieve our goals?
I am particularly interested in the influence that OIRA has
on the development of environmental regulations. The work of
the Environmental Protection Agency is vital to the protection
of our lakes, rivers, and the air we breathe. The regulations
that the EPA drafts often involve calculating benefits that can
be difficult, if not impossible, to quantify. At times, these
regulations may be based on conflicting data that spark fierce
debate in the scientific community.
The President's nominee, Susan Dudley, has had considerable
experience working with OIRA. After earning a master's degree
from the Sloan School of Management at MIT, Ms. Dudley worked
for a time with the EPA and then on the staff of OIRA itself.
She spent 8 years as a consultant doing environmental analysis
before joining the Mercatus Center at George Mason University,
where she served as a senior research fellow and later as
director of the Regulatory Studies Program. While with the
Mercatus Center, Ms. Dudley has filed numerous public comments
in regulatory proceedings concerning a broad spectrum of
issues. The Committee has closely reviewed these comments and
numerous other published articles in its consideration of Ms.
Dudley's nomination to this important position, and I am
certain that the Committee members today will explore many of
these writings in some detail.
For my part, I intend to discuss with the nominee some of
her comments on safety and environmental standards. I also want
to explore her advocacy of ``regulatory budgets'' to cap the
costs that can be imposed on any one industry as a result of
regulation. Ms. Dudley, your views on these and other matters
are most important for the Committee to fully understand as we
deliberate on your nomination, and I look forward to exploring
these and other issues with you today.
Senator Akaka.
OPENING STATEMENT OF SENATOR AKAKA
Senator Akaka. Thank you very much, Madam Chairman. It is
good to be back here with you again and with the Committee. And
I join you in welcoming Ms. Dudley, the President's nominee to
head the Office of Information and Regulatory Affairs, to our
Committee today. Ms. Dudley, I notice your family sitting in
back of you, and I want to welcome them to this hearing.
This position is far more important than is generally
recognized. Those who understand the inner workings of the
Federal Government know the critical nature of this office.
OIRA, created as part of the Paperwork Reduction Act (PRA), has
wide-ranging responsibility for the collection of government
information under the PRA--reviewing draft regulations,
developing and promoting governmentwide policies on information
technology, privacy, and statistics.
The influence of OIRA is truly substantial. The office
affects the daily life of every citizen, from the distribution
of government benefits to privacy rights, to regulations
affecting the environment. That is why these decisions cannot
be left to political whim or individual political preferences.
If OIRA disregards the technical expertise of and decisions
made by Federal agencies, then public health and safety is at
risk.
Unfortunately, I have several concerns with Ms. Dudley's
nomination. Madam Chairman, I would like to ask that my full
statement be placed in the record, and I will finish off with
an abbreviated statement.
Chairman Collins. Without objection.
[The prepared statement of Senator Akaka follows:]
PREPARED STATEMENT OF SENATOR AKAKA
Thank you Madam Chairman. I join you in welcoming Ms. Dudley, the
President's nominee to head the Office of Information and Regulatory
Affairs (OIRA), to our Committee today. I also welcome her family this
afternoon.
This position is far more important than is generally recognized.
Those who understand the inner workings of the Federal Government know
the critical nature of this office. OIRA, created as part of the
Paperwork Reduction Act (PRA) in 1980, has wide-ranging responsibility
for collecting government information under the PRA, reviewing draft
regulations, and developing and promoting government-wide policies on
information technology, privacy, and statistics.
The influence of OIRA is substantial. The office affects the daily
life of every citizen--from the distribution of government benefits to
privacy rights to regulations affecting the environment. That is why
these decisions cannot be left to political whim or individual
political preferences. If OIRA disregards the technical expertise of
and decisions made by Federal agencies then public health and safety is
at risk. Unfortunately, I have several concerns with Ms. Dudley's
nomination.
First, Ms. Dudley has written in opposition to regulations
preserving the environment, protecting individual privacy, and
promoting public safety and workers' rights. For example, since 2001,
OIRA sought public comment three times for suggestions on regulations
that should be modified or repealed. Twice, Ms. Dudley and her
colleagues at the Mercatus Center submitted proposals that, if
implemented, would benefit industry over the environment, public
health, and workers' rights. In 2001, Ms. Dudley submitted to OIRA 44
different regulations for repeal or modification--most of which
impacted the environment. OIRA should not become a place where
environmental regulations go to die.
Second, I am concerned that Ms. Dudley may expand upon Mr. Graham's
risk assessment and peer review proposals and set impossibly high
scientific evidence standards before accepting agency proposals for
regulatory action. Too stringent a criteria, in my opinion, would lead
to unnecessary delay which would only endanger the public. I expect the
OIRA Administrator to trust agencies to use the scientific evidence
available, instead of requiring irrefragable proof before a regulation
is implemented.
Third, a number of respected organizations have raised additional
concerns about Ms. Dudley's inconsistent approach to applying common
economic principles in a manner that is outside of mainstream economic
usage. According to her writings, the one constant is that Ms. Dudley
always seems to find regulations onerous or without need. I want to
know how Ms. Dudley would apply common economic principles to ensure,
should she be confirmed, that OIRA operates in a fair and transparent
manner.
Again, Madam Chairman I appreciate your holding today's hearing,
and I look forward to our discussion with Ms. Dudley.
Senator Akaka. It is very important that we have
regulations preserving the environment, protecting individual
privacy, and promoting public safety and workers' rights. As
such, peer review and risk assessment programs cannot set
scientific evidence standards so high that OIRA cannot accept
agency proposals for regulatory action.
Also, I am concerned about an issue raised by a number of
respected organizations. They claim that Ms. Dudley uses common
economic principles in a manner that is outside of mainstream
economic usage. I want to know how Ms. Dudley would apply
common economic principles to ensure that OIRA operates in a
fair and transparent manner.
Again, Madam Chairman, I appreciate your holding today's
hearing and look forward to our discussion with Ms. Dudley.
Thank you very much.
Chairman Collins. Thank you. Senator Levin.
Senator Levin. Madam Chairman, I don't have an opening
statement. I do share a number of the concerns of Senator
Akaka, which we could explore during questions. I notice that
our dear colleague, Senator Warner, is here to introduce Ms.
Dudley, and I think on our side we would be willing to yield to
him before any other opening statements are made because of his
time schedule, if that would be desirable from his perspective.
Chairman Collins. If that is OK with my two colleagues, we
will----
Senator Carper. Madam Chairman.
Chairman Collins. Senator Carper.
Senator Carper. I have been yielding to John Warner since
he was Secretary of the Navy and I was Lieutenant Tom Carper in
the U.S. Navy 7th Fleet. So I am happy to yield again.
Chairman Collins. And, Senator Pryor, thank you.
Senator Warner, we are very pleased to have you with us
today as a Member of this panel and also the distinguished
chairman for a little while longer of the Senate Armed Services
Committee and, of course, as the senior Senator from the
Commonwealth of Virginia. We welcome you to introduce the
nominee.
Senator Warner. Thank you, Chairman Collins, my colleagues
on the Committee, and I appreciate the courtesy, Senator Levin,
that you have always extended me and other colleagues.
I was sorry to be a few minutes late. This Committee is
known for punctuality. The Armed Services Committee somehow
does not have the same reputation. [Laughter.]
First, may I inquire, have you introduced the members of
your family?
Chairman Collins. Not yet.
Ms. Dudley. No.
Senator Warner. I wonder if we might invite the nominee to
introduce her family.
Chairman Collins. I was planning to do that in a few
moments, but now would be a fine time as well.
Ms. Dudley. OK. With me I have Brian Mannix, my husband,
and my two children, Christopher Mannix and Gregory Mannix.
Chairman Collins. We welcome all of you.
Ms. Dudley. Thank you.
OPENING STATEMENT OF SENATOR WARNER
Senator Warner. Thank you. We are delighted that you have
accepted this nomination by the President. You have brought
your family, and you now appear before this Committee of the
U.S. Senate. The Senate is not an unfamiliar institution to you
because of your extensive background.
Madam Chairman, you recited much of her biography, but I
would like to just add another perspective. Without a doubt,
the nominee has accumulated a wealth of experience in the
regulatory process as she has held several positions in
regulatory-related fields.
After receiving her B.S. summa cum laude--that is a plateau
that I never achieved, nor will I ever in my lifetime--from the
University of Massachusetts and her M.S. from the Sloan School
of Management at MIT, she began a career that spanned almost 8
years within the Federal Government serving in various
agencies: served in the Environmental Protection Agency as a
financial consultant; in the Department of Energy Office of
Environment, Safety, and Health, assisting the Assistant
Secretary; in the Commodity Futures Trading Commission as an
economic adviser to Commissioner Albrecht; and more recently
she has already served the OIRA for almost 4 years as both a
senior economist and a deputy chief of the Natural Resources
Branch. And you recited what she has done in the interim, so I
will not go further except to ask to have my entire statement
put in the record.
Chairman Collins. Without objection.
[The prepared statement of Senator Warner follows:]
PREPARED STATEMENT OF SENATOR WARNER
Chairman Collins and Senator Lieberman, I thank you for holding
this confirmation hearing today and allowing me the courtesy of
introducing a fellow Virginian, Susan Dudley. Ms. Dudley has been
nominated to serve as Administrator for the Office of Information and
Regulatory Affairs (OIRA) within the Office of Management and Budget
(OMB). She is joined today by her husband, Brian Mannix and her two
sons, Gregory and Christopher Mannix.
The Office of Information and Regulatory Affairs was first
established under President Ronald Reagan through the Paperwork
Reduction Act of 1980. This Act required the office to manage
information and statistical policy while enforcing paperwork reduction
controls. In addition, subsequent Presidential Executive Orders have
further refined the Office's role in the regulatory process, providing
OIRA the responsibility to review the substance of agencies' regulatory
actions before publication in the Federal Register.
Without a doubt, Susan Dudley has accumulated a wealth of
experience in the regulatory process as she has held several positions
in regulatory related fields.
After receiving her BS, summa cum laude, from the University of
Massachusetts and her MS from the Sloan School of Management at MIT,
Ms. Dudley began a career that spanned almost 8 years within the
Federal Government serving in various agencies. She has served in the
Environmental Protection Agency as a financial consultant; in the
Department of Energy Office of Environment, Safety and Health assisting
the Assistant Secretary; in the Commodity Futures Trading Commission as
an Economic Advisor to Commissioner Albrecht. And more importantly, she
already has served in OIRA for almost 4 years as both a Senior
Economist and a Deputy Chief in the Natural Resources Branch.
Subsequent to her public service, Ms. Dudley has worked in
different facets of the private sector from financial and environmental
consulting to working as an Adjunct Law Professor at the George Mason
University School of Law teaching regulatory studies. Most recently,
Ms. Dudley served as Director of the Mercatus Center at George Mason
University, which focuses its research efforts on the conditions that
enable good governance and successful economies.
In my view, Susan Dudley's impressive credentials makes her highly
qualified to serve as Administrator of OIRA.
I am pleased to introduce her today, and I look forward to the
Committee's favorable consideration of her nomination.
Senator Warner. I am aware of concerns about her background
in the positions she has held in public service, but I would
only say that any individual worth their salt who has served in
various public positions has engendered some controversy in
their lifetime. And I would accept willingly, hopefully, that
controversy in exchange for the extraordinary record of public
service. Were I to ever stand--and it is most unlikely--for a
public office again, not in the Senate--that is likely to
happen, but I mean in other avenues, there would be thunder
directed at me as a consequence of my previous positions in the
Executive Branch of our government. So accept it with the
bravery that you have shown in the past, and look them in the
eye and tell it as it is, and be responsibe. And I wish you
luck, and you're on your own. [Laughter.]
Chairman Collins. Ms. Dudley, I am not sure you should take
great confidence in that.
Thank you, Senator Warner, for that introduction.
We now will resume opening statements. Senator Levin, were
you finished?
Senator Levin. Yes. Thank you.
Chairman Collins. Senator Carper.
Senator Carper. No, thank you.
Chairman Collins. Senator Pryor.
Senator Pryor. No, thank you.
Chairman Collins. Thank you.
I do want to thank Senator Warner for his introduction of
Ms. Dudley. Susan Dudley has filed responses to the
biographical and financial questionnaires, answered pre-hearing
questions submitted by the Committee, and had her financial
statements reviewed by the Office of Government Ethics. Without
objection, this information will be made part of the hearing
record with the exception of the financial data, which are on
file and available for public inspection at the Committee
offices.
Our Committee rules require that all witnesses at
nomination hearings be sworn in and give their testimony under
oath, so, Ms. Dudley, if you would please stand and raise your
right hand. Do you swear that the testimony you are about to
give to the Committee will be the truth, the whole truth, and
nothing but the truth, so help you, God?
Ms. Dudley. I do.
Chairman Collins. You may be seated.
Ms. Dudley, please proceed with your statement.
TESTIMONY OF SUSAN E. DUDLEY\1\ TO BE ADMINISTRATOR, OFFICE OF
INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND
BUDGET
Ms. Dudley. Thank you, Chairman Collins, Senator Lieberman,
and Members of the Committee for the opportunity to be here to
answer your questions this afternoon. I am honored to be
President Bush's nominee to be Administrator of the Office of
Information and Regulatory Affairs at the Office of Management
and Budget. And if I am confirmed, I look forward to working
with each Member of this Committee.
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\1\ The prepared statement of Ms. Dudley appears in the Appendix on
page 27.
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I came to Washington almost 25 years ago as a newly minted
MBA from MIT's Sloan School of Management, deeply committed to
environmental issues and interested in learning how government
policy can foster environmental and economic prosperity. At the
Environmental Protection Agency, I observed how incentives
matter when it comes to promoting compliance with environmental
policy.
To provide incentives for compliance with environmental
regulation, I developed the BEN model, still in use today, to
estimate the economic benefit of noncompliance for civil
penalty assessments and used it to help negotiate the largest
civil penalty for a water quality violation at that time. I
went on to work as a career staff economist at OIRA and later
at the Commodity Futures Trading Commission.
For the last 8 years, I have studied and written on
regulatory process and policy at the Mercatus Center at George
Mason University. I also teach courses on regulation as an
adjunct professor at the George Mason University School of Law.
I believe my years working with, studying, and teaching about
regulation will serve me well if I am confirmed as
administrator of OIRA. But I also recognize that my role will
be very different from what it is now.
As a researcher and an academic, I have written
extensively, both in scholarly journals and the popular press.
Those writings have sometimes been provocative with the goal of
challenging the way people think about the consequences of
regulation. If confirmed, however, I will have a different
role. The OIRA Administrator is responsible for implementing
the laws of the land as Congress has written them. I will lead
a team of talented and dedicated career analysts at OMB in
working with agencies, Congress, and the public on issues
regarding regulation, information technology and policy,
privacy, paperwork review, and statistical policy. One thing I
will continue to do is foster debate. As my students will
attest, I am fair and open-minded and will listen to all who
want to have a say in the public process.
OIRA was created when President Carter signed into law the
Paperwork Reduction Act of 1980. It is guided by several
statutory authorities, such as the Privacy Act, the Unfunded
Mandates Act, and the E-Government Act, as well as President
Clinton's Executive Order 12866 governing regulatory review.
The common theme in these different authorities is the need
for a central office to coordinate, oversee, and guide
executive branch agencies to ensure their activities are
consistent with statutory and executive objectives and
accountable to Congress, the President, and the American
people.
OIRA plays a vital role in ensuring that this process is
transparent, open, and accountable, not to special interests
but to the broader public interest, and I am committed to that
role. Throughout my career, I have endeavored to conduct myself
with honesty and integrity and to treat others with respect and
openness. If I am confirmed, I look forward to working with you
to fulfill the important functions of OIRA.
Thank you for giving me the opportunity to make this
statement, and I look forward to your questions.
Chairman Collins. Thank you for your statement. I am now
going to ask you three standard questions that we ask of all
nominees.
First, is there anything that you are aware of in your
background that might present a conflict of interest with the
duties of the office to which you have been nominated?
Ms. Dudley. Not that I am aware of, Senator.
Chairman Collins. Second, do you know of anything, personal
or otherwise, that would in any way prevent you from honorably
and fully discharging the responsibilities of this office?
Ms. Dudley. No, Senator.
Chairman Collins. And, third, do you agree without
reservation to respond to any reasonable summons to appear and
testify before any duly constituted Committee of Congress if
you are confirmed?
Ms. Dudley. Yes, Senator, I do.
Chairman Collins. We will now proceed to the first round of
questions limited to 6 minutes each, but I would inform my
colleagues that we will be doing a second round as well.
Ms. Dudley, I have read many of your writings, and many of
them are quite provocative in the approach that you have taken.
I kept in mind as I read your many writings and comments that
you were writing from a more academic perspective rather than
as a public official with broader responsibilities.
But if you read some of your writings, one could get the
impression that you think that all regulatory matters can be
boiled down to a hard dollar-and-cents calculation of the costs
and the benefits. And yet it is very difficult to put a dollar
value on many benefits. What is the value of being able to go
outside and see an unpolluted sky? I am not talking about the
health benefits. I am talking about the scenic value of being
able to see a sparkling, unpolluted river or clean skies. What
is the value of just knowing that our rivers and lakes are
clean enough to swim in and to fish in?
It is difficult to quantify everything. I think of that
overplayed television ad about some things in life are
priceless, but I am not sure you see it that way. I think you
see everything as being quantifiable, that for everything else
there is OIRA to calculate the cost and the benefit.
What is your response to that? Does your approach to
regulations take into account the nonquantifiable benefits?
Ms. Dudley. Yes, indeed, I agree with everything that you
said because I also enjoy a clear stream. I love going out and
enjoying a clean environment, and a lot of these things are
hard to quantify.
I have actually never advocated for a strict benefit/cost
analysis, and indeed, in my writings, in the comments that we
file with Federal agencies we have a checklist that has seven
elements, and cost/benefit is just one of seven. Other things
include--and certainly there are a lot of nonquantifiable
effects. So what kind of scientific information do we have?
What are the distributional effects? Who is paying the cost?
Who is getting the benefit?
So there are a lot of different issues that need to be
factored in, and cost/benefit analysis is not something that I
would think is the--it certainly would not be a deciding
factor.
Chairman Collins. I want to follow up further on this
theme. At one point you were quoted in the Washington Post as
saying that a rule to increase fuel economy standards for light
trucks was ``the worst rule of 2003.'' I personally believe
that it is absolutely essential that we increase corporate
average fuel economy standards, the so-called CAFE standards,
because doing so would have important benefits for consumers,
those are dollar-and-cents benefits, but also for our national
security and for our environment. In the case of national
security, I think it is very important that we decrease our
dependence on foreign oil, so I have supported proposals that
would save more than a million barrels of oil per day by
raising CAFE standards.
If you are confirmed, would you take into account the
national security implications, the environmental benefits, as
well as the more quantifiable consumer savings of reduced oil
consumption in any future rulemakings on CAFE standards?
Ms. Dudley. Well, it is interesting that my criticism of
that rule in 2003 was just that, that it looked at the consumer
savings but it didn't look at the externalities, the energy
security, the energy independence, the environmental benefits,
the fact that--the unintended consequence, the size of the
cars. So that was precisely my criticism of the analysis behind
that regulation was that it didn't, because indeed fuel economy
is important to me, too. My husband and I bought--we drive two
hybrid cars, and we had to wait in line for 6 months for the
very first Prius that came out in the United States. So I
believe in fuel efficiency, and I agree with you, those are all
the reasons why we should be making those moves.
And, in fact, the CAFE rule in 2006--I was not critical of
that one because I think it did address specifically those
issues that you mentioned.
Chairman Collins. But why would you call it ``the worst
rule of 2003'' if it had additional benefits that weren't
recognized?
Ms. Dudley. The criticism was really of the analysis, that
the analysis was a one-size-fits-all analysis that didn't
recognize that some consumers may bear more--or have more or
less benefits from that regulation, depending on how much they
drove. So I thought rather than focusing on the consumer
savings, which I think is a decision consumers can make for
themselves, the whole purpose of a CAFE rule would be these
things that are external, that are, in economic terms, external
to the consumer's pocketbook decision.
Chairman Collins. Senator Akaka.
Senator Akaka. Thank you very much, Madam Chairman.
Ms. Dudley, in ``The Primer on Regulation'' that was
published in 2005 by the Mercatus Center, you wrote, ``It is
important to limit regulatory activity to identified market
failures. In the absence of a significant market failure,
individuals are better able to make decisions regarding trade-
offs in their lives than Government regulators.''
In many instances, individual citizens are not in a
position to act in the manner that you advocate. The power and
financial leverage of businesses and government can leave
individuals at a distinct disadvantage. Government regulation
is often the only recourse to protect the interests of
citizens, and so I would like to ask you to share with us what
you mean by the concept of market failure?
Ms. Dudley. Yes, Senator. Market failure is a standard
economic concept that really refers to what is the root cause
of a problem that we observe. And the reason that I think it is
important and the reason that it is widely accepted to be an
important first step in looking at and understanding regulation
is that if you don't know what the root cause of the problem
is, it is hard to address it in a way that actually targets the
problem and doesn't end up having unintended effects.
So a market failure could include pollution because that is
a cost that the company that is putting something up its
smokestack does not bear, so that is an externality that would
need regulation. Another is a common resource, like fishing.
Nobody owns the fish until you take it out of the water, so you
need to have some regulations so that we don't overfish. And
perhaps what you were speaking to is information asymmetry. If
certain groups have information that others do not have, that
is a market failure, and that can be addressed through
regulation by providing that information.
So I think understanding the root cause is the purpose of
market failure. And, by the way, this is not something that is
unique to me. I think standard textbooks will refer to it, and
indeed, the guidelines issued by both President Clinton and
President Bush refer to that as the first step in understanding
regulation.
Senator Akaka. Thank you. Ms. Dudley, the Davis-Bacon Act
requires that prevailing wages are paid to workers on public
works projects. All Federal Government construction contracts
over $2,000 must include a provision for paying workers no less
than the prevailing wages and benefits paid for similar
projects. On the record, you have criticized the Davis-Bacon
Act imposing costs that fall disproportionately on young and
minority workers. You also said that Davis-Bacon does not offer
net benefits to society, that there is no economic
justification for the act, and that alternative standards were
not adequately explored.
Now, given your comments about the Davis-Bacon Act, what
assurances can you provide this Committee that, if confirmed,
you will issue regulations related to the Davis-Bacon Act in an
unbiased manner?
Ms. Dudley. I have actually never suggested that the Davis-
Bacon Act shouldn't exist. I commented on a rule back in 1999
on a provision to implement one aspect of it--the helper rule,
or how to define ``helper'' under the Davis-Bacon Act. And my
concern with that particular regulation was that the proposed
definition would harm young, lower-skilled minority and female
workers. The quote that you said, I was actually quoting a GAO
study there, so those were not my words, but rather the GAO
statement about the Davis-Bacon Act. So I have not--it was
almost 10 years ago that I wrote that, and it was about a very
specific proposal.
If I am confirmed, I have every intention of following the
laws of the land as they are written, Senator. I would like to
assure you that.
Senator Akaka. Ms. Dudley, as I mentioned in my opening
statement, I am concerned about the value you will place on
scientific evidence in determining whether regulatory action is
necessary. Science can be extremely helpful in showing the
consequences of actions and offer solutions to address
resulting problems. However, science can have a degree of
uncertainty, and I am concerned that you may require absolute
scientific proof before relying on scientific evidence.
If scientific evidence provides inconsistent results, how
should agencies proceed with regulatory action?
Ms. Dudley. There are guidelines that agencies rely on that
talk about how to deal with uncertainty, and I have no
intention to change those guidelines. I agree with you. We will
never have perfect scientific information.
Senator Akaka. Thank you very much. Thank you for your
responses. Thank you, Madam Chairman.
Chairman Collins. Thank you. Senator Levin.
Senator Levin. Thank you, Madam Chairman.
In your answer to Senator Akaka, I think you said that the
words that there is no economic justification for a Federal
role in defining construction practices and determining wages
as required by the Davis-Bacon Act were these not your words?
Ms. Dudley. Oh, I am sure they were my words, Senator, but
they were referencing a GAO study, peer-reviewed economic
journal article and GAO.
Senator Levin. Well, because I am looking at what purports
to be your words.
Ms. Dudley. Yes, I am saying----
Senator Levin. Did you believe that there is no economic
justification for a Federal role in defining construction
practices and determining wages as required by the Davis-Bacon
Act? Did you believe that when you wrote it?
Ms. Dudley. Yes. I examined the GAO study, and yes, I cited
from the GAO study.
Senator Levin. All right. And that is your current
position?
Ms. Dudley. I have not studied the Davis-Bacon Act at all
except for that one regulation on helper rules, and my concern
there was that it harmed the very people that I thought it was
intended to protect.
Senator Levin. Is there an economic justification for the
Federal Government setting a minimum wage?
Ms. Dudley. I have never studied the minimum wage.
Senator Levin. Back in 2000, you wrote relative to the
public's right to know about chemical plant risks that if there
is a public demand for this information, as EPA's benefit
assessment argues, nongovernmental organizations would find
value in deriving it. How would a nongovernmental organization
derive information from chemical plants?
Ms. Dudley. I am not in detail familiar with that comment.
I am not sure I could answer that part of the question.
Senator Levin. OK. And then you went on to say, ``The fact
that they don't suggests that the value of the information to
the public is less than the cost of the information.'' How do
you value that information about the risks that people face
from chemical plant accidents or attacks?
Ms. Dudley. I think it is very important to inform people
about hazards that are in their community, and I think that is
very important because you cannot make decisions for yourself
and your family if you do not have that information.
I believe my general comment on that regulation was that we
needed to consider what the trade-offs were, and I was
concerned that--well, terrorists--this was in 2000 so we didn't
have evidence yet, but that terrorists might be able to access.
That was information that developed scenarios for what is the
worst-case thing that could happen if this chemical is
released.
Senator Levin. Is there always a nongovernmental
organization out there to obtain information or to take action?
That is the assumption of your comment.
Ms. Dudley. With the Toxic Release Inventory, we certainly
see a lot of nongovernmental organizations----
Senator Levin. Is there always a nongovernmental
organization that you can rely on to protect the public
interest?
Ms. Dudley. Absolutely not. I definitely see a role for
government in protecting the public and informing the public.
Senator Levin. Because that statement says that
nongovernmental organizations would find value in deriving that
information. The fact that they don't suggests what I just
quoted; in other words, if there is value in obtaining it,
there will be some nongovernmental organization that will
obtain it. But isn't it true that there is not always a
nongovernmental organization that has either the resources or
the priorities to pursue a particular cause and you need to
have a government to protect the public interest?
Ms. Dudley. Yes, you are certainly right.
Senator Levin. In 2002, you commented on an SEC rule to
protect consumer privacy by limiting financial institutions'
ability to share customer financial information without proper
consent, and here is what you wrote about protecting the
privacy of consumers' financial information: ``The implicit
premise of the rule is that individuals and firms cannot come
to a mutually satisfactory agreement as far as privacy is
concerned without resort to government assistance.'' Is that
the premise of the rule?
Ms. Dudley. Actually, I did not comment on that rule. That
was another scholar at the Mercatus Center.
Senator Levin. I see. So those are not your words?
Ms. Dudley. I believe what that is, is in OMB's Annual
Report to Congress, they asked for recommendations for
regulations, and what we did is we provided summaries of
regulations we had researched. So I think that is where that
came from. But I did not do that analysis, so I can't----
Senator Levin. Those, then, were not your thoughts or words
at the time.
Ms. Dudley. Right.
Senator Levin. You suggested that OIRA conduct independent
assessments, that they have an outside organization to come up
with an independent cost/benefit analysis separate from OIRA,
rather than just having OIRA do the independent analysis, cost/
benefit analysis. So you would have a nongovernmental
organization to operate above or alongside of OIRA to review
and analyze regulations. You have said that OIRA from inside
the Executive Branch cannot ``provide the necessary check or
independent assessment of costs and benefits.''
Do you believe that?
Ms. Dudley. I am not exactly sure where that is from, but I
believe that was my recommendation for a congressional office
of regulatory analysis.
Senator Levin. According to my notes, outside of the
Executive Branch you wanted independent analysis, outside of
the government, not just the Executive Branch.
Ms. Dudley. I would love to follow up on this if I am wrong
about this, but I believe that is testimony before Congress
where I recommended a congressional office--or supported the
congressional office.
Senator Levin. In any event, my last question here, because
I am out of time, would be to close that thought. What would be
the cost of that independent analysis?
Ms. Dudley. I don't know, sir.
Senator Levin. Well, shouldn't you make a cost/benefit
analysis before you propose that?
Ms. Dudley. It was a recommendation to Congress, and I
assumed that the Members that I made the recommendation to
could analyze it.
Senator Levin. You have a lot of confidence in us.
[Laughter.]
Thank you, Madam Chairman.
Chairman Collins. Senator Carper.
Senator Carper. Thank you, Madam Chairman.
Ms. Dudley, would you tell us again the names of your sons
and how old they are?
Ms. Dudley. Gregory, who is behind me--who shouldn't be,
because every time I go back, I get his long legs. Gregory is
16, and he is in the 11th grade. And Christopher is 13 and in
the 8th grade.
Senator Carper. OK. My sons are 16 and 18, and our oldest
boy is actually a freshman engineering student at a school up
in Massachusetts where you spent some time.
Ms. Dudley. Very impressive.
Senator Carper. He is a lot more impressive than his
father, I can assure you of that.
I wanted just to start off by--every now and then I say to
my sons, ``There is nothing wrong with making a mistake. We all
make mistakes. And sometimes we learn the most from the
mistakes that we make. The key is not to make the same mistakes
over and over and over again.''
Senator Pryor and I, along with Senators Voinovich and
Alexander, have sort of encouraged the Senate to start
sponsoring every 2 years right after the election something we
call ``orientation for new Senators and spouses.'' And the idea
is for the new guys and gals coming here to learn from our
mistakes and the faculty of current Senators and spouses, to
say these are the ways that we messed up and you don't want to
make our mistakes, to learn from our mistakes.
If you had to talk about some mistakes that you have made
of a professional nature with respect to really some of the
issues that we are talking about here today and looking back in
hindsight, what are some of the mistakes that you have learned
from that would guide you maybe a bit differently in this new
role?
Ms. Dudley. I actually am proud of the things that I have
written. If I had known I was going to be nominated for a
position, I might have written less. But I think if you read--
don't just look at things pulled out of context, but if you
read what I have written, I have always tried to be thoughtful
and careful--and provocative, yes, challenge the way people
think about things. But I have tried to do it openly,
transparently, and with integrity. So I am sure I have made
lots of mistakes, but in terms of the things that I have
written, I think that they are sound.
Senator Carper. All right. We all have probably our own set
of core values to guide us as we approach a particular job or
an issue. My own core values are pretty basic. It is to figure
out the right thing to do and just do it; to treat other people
the way I want to be treated; to be committed to excellence in
everything that I do; to use some common sense; and when I
think I am right, just not to give up. And I call them sort of
like my moral compass, and when I look at an issue or a
challenge, I sort of look at the issue through that prism of
those core values to help me figure out the way to go forward.
And when I get off on the wrong track, these kind of help get
me right back on track.
Would you just take a minute and talk with us about your
core values and how they guide you in approaching an issue or a
regulation or whatever?
Ms. Dudley. OK. I would say some of my core values are like
yours. They are honesty and integrity and doing--I am a wonk; I
am a nerd. I like to do the research, and I do not like to know
the answer before I have done the research. But to back up from
there, core values, I would say I care deeply about the
environment. That is a core value. And I always have. When I
came to Washington to try to do environmental policy that
improves the environment, I was concerned that some of the
policies did not have the intended effects. So what I have
become is what I have seen written in the newspaper, ``She is a
free market environmentalist.'' And I think that is true, and
that is going back to the question I think Senator Akaka said.
You need to look at what is the root cause of the problem and
then address it. And often, if you look at the root cause, you
can find there are ways to harness people's incentive, harness
market forces in order to respond to that, and really have the
effects that we want on such issues as health care, worker
safety, and the environment.
But back to core values, honesty and openness, and I hope
that is one message I can share with all of you, that I really
am open and would really like to work with all of you and
anybody who is interested in regulatory issues.
Senator Carper. All right. What I have read about you and
what you have said here and what others have said about you
suggests that you have spent a lot of your life and your career
working on and studying regulatory issues. I believe you spent
some time working at OIRA itself, and I think that has been
spoken to today.
Based on your experience and your work, what do you think
we do right when it comes to regulations? And what do you think
we do wrong? And if confirmed, how would you seek to address
some of the problems that you see?
Ms. Dudley. I think there are lot of things that we do
right. I think that the analytical framework that President
Clinton put in place with Executive Order 12866, which has been
continued, I think that shows that it is not partisan. There is
a nonpartisan approach to understanding regulations to make
sure that they are having the intended effects. So I think we
are doing that right.
I think that we are doing a better and better job of
understanding these hard-to-understand benefits and costs. And
we are doing better and better in the environment area. We have
new challenges that this Committee is very aware of, I am sure,
in homeland security. They are all new challenges there for
costs and benefits that we have to really understand how to
measure those. And transparency, I think we are getting better
and more open in transparency, not just in the review process,
which the Office of Information and Regulatory Affairs I think
has become better and better at being open and transparent in
their review. But also with e-rulemaking, the general public
has a much better opportunity now to get involved in this
process.
Senator Carper. All right. Thanks. Thanks, Madam Chairman.
Chairman Collins. Thank you. Senator Pryor.
Senator Pryor. Thank you, Madam Chairman.
Chairman Collins. Senator Pryor, I would note that with the
new Congress you are going to move up substantially on this
Committee.
Senator Pryor. I know. I won't have to do long-distance
phone calls to you now. [Laughter.]
Thank you so much. Let me ask, if I may follow up on
Senator Levin's question from a few moments ago, about
financial information and privacy and the mutually satisfactory
agreement that you talked about, and you said those were not
your words, that someone else at the institute had written
that?
Ms. Dudley. That comment on SEC's financial privacy was not
mine, no.
Senator Pryor. But as I understand it, in that same
analysis you did write to OPM under your name that the
regulation in question was overly burdensome and should be
withdrawn. Is that right?
Ms. Dudley. I would have to check. I don't think we
suggested that it be withdrawn. But I can get back to you on
that, Senator.
Senator Pryor. Yes. My research says that you did, but I
just wanted to make sure and clarify that because in response
to Senator Levin's question, you almost indicated that you did
not agree with that or you did not really comment on that. But
I was sensing that you were distancing yourself from that. Do
you agree with what he said when it comes to financial privacy?
Ms. Dudley. I care a lot about privacy, but I am basically
a nerd, and it is hard for me to comment on something when I
have not done the research. So I did not--but I will get back
to you this afternoon on that.
Senator Pryor. OK. And the center that you have been
working for, is it called Mercatus?
Ms. Dudley. Mercatus, yes, sir.
Senator Pryor. Do you generally agree with the positions
that Mercatus takes?
Ms. Dudley. The scholars at Mercatus are independent
scholars. It is an academic environment, so we have the
academic freedom of being independent scholars. But we do share
a feeling that market-based processes can be more effective at
achieving people's needs and meeting social goals. So in that
sense, yes, I would share----
Senator Pryor. Generally?
Ms. Dudley [continuing]. That basic value, yes, that
generally--yes.
Senator Pryor. Now, you have written something that I think
is somewhat controversial on the senior death discount where
you talked about this.
Ms. Dudley. I have never written on a senior death
discount.
Senator Pryor. OK. Do you agree that there is or should be
such a thing as the senior death discount?
Ms. Dudley. I think that what we all want for ourselves and
our families and our children is to live long, healthy, and
happy lives. So what I have recommended and what I have used
is, in addition to--so this is what is--it is all coming down
to whether you are measuring lives. I have recommended looking
at the number of years of lives. I think it is important to
understand longevity. That is not--there is something else that
people have referred to as a senior death discount, and it is
not the life years approach, which is what I have recommended,
and it is in the guidelines.
Senator Pryor. Is it fair to say that you think that an
older person's life is worth less in an economic sense than a
younger person's life?
Ms. Dudley. I think what I would say is that, regardless of
how old you are, you would like to live longer. So if you are
60 and there are two options, two alternatives you could have--
one that provides one more year of life and one that adds 10--
you would like to have that piece of information. You would
like to have it if you are 60 and looking at your own life. You
would like to have it if you are looking at your 6-year-old's
life. You would like to know how much you are extending it.
So I don't think it is related to age, but it tells you if
this rule will provide me 10 more years of life, that is better
than a rule that provides me 5 years.
Senator Pryor. All right. Well, I am puzzled, then, because
as I understand it, you wrote something called ``How Not to
Improve Public Health,'' and you wrote something called
``Arsenic Comments,'' Public Interest Comment on the
Environmental Protection Agency's request for comments on
national drinking water regulations for arsenic, and you are
commenting on arsenic. And as I understand it, what you are
saying, as I read your comments, is that these stricter
standards for arsenic, you basically say, are ``an unwelcome
distraction.'' I have that in quotes. It is ``an unwelcome
distraction.'' And as I understand it, arsenic
disproportionately harms older people, people who are advanced
in age, and, therefore, if they had the information that you
say they shouldn't have, their life might be prolonged. But you
are saying we shouldn't have these regulations and people
shouldn't know about the arsenic in the water, so they might
not be able to add that year to their life.
How am I misunderstanding what you are writing?
Ms. Dudley. Well, on that, I don't know that it is true,
but I don't think that was the point of--I don't think that it
is true that arsenic disproportionately affects older people. I
am not sure. Probably not because the concern is cancer, so it
would be younger people.
The point of that, because, of course, we all want safer
drinking water, but there are small communities, particularly
in the Southwest, that have higher natural levels of arsenic.
They would have had to expend large amounts of money to meet
those regulatory standards for their drinking water systems.
And the unwelcome distraction was because it was at a time when
we were all worried about whether terrorists might be attacking
our water systems.
So looking at a small community that has limited resources,
how are they best to address those limited resources, and that
was my concern. So it was not please do not give them
information. I never suggested that, and I never suggested that
we do not care about it because it is elderly people. It was
really a question of how do we deal with the priorities given
the different risks, public health risks with drinking water
systems that we face.
Senator Pryor. OK. Well, maybe your writings are not clear
or maybe I have not read them thoroughly enough, but as I
understand your writings, basically you look at the age as a
factor when you look at regulation. Is that not right? Is that
not fair?
Ms. Dudley. What I have recommended is that, in addition to
looking at how many lives are saved, which is one standard
metric, we should also use the second standard metric, which is
life years. And that really just tells you how many years are
we extending life by. I think both of them are valid, and I
think they both provide valuable information, and that looking
only at one does not tell you enough information.
Senator Pryor. Well, I am out of time, but I assume if you
are going to have that second metric, as you call it, then you
are making a judgment call on the number of years left as it
relates to regulation.
Ms. Dudley. I think that is information that we have, and
so providing that information to make the decision, I think it
does help you decide, will this regulation extend lives longer
than that regulation? And I think that is an important piece of
information to have.
Senator Pryor. Thank you, Madam Chairman. I have overstayed
my time.
Chairman Collins. Thank you.
Ms. Dudley, I know it is difficult to go back and look at
comments or writings that you made several years ago, but you
have commented extensively in your academic role, and I want to
go back to some comments that you made that were published in
1998 in an issue of the magazine Regulation.
In these comments, you suggested that a jurisdiction that
expects ozone levels to exceed the standard might offer to
compensate an upwind jurisdiction in order to reduce ozone
pollution. I have to tell you, coming from a State that is
downwind of almost all power plants in the United States, this
seems completely backwards to me. Just one of these power
plants can cause more pollution of the type that produces smog
and acid rain than all of the automobiles, factories, and
businesses in Maine combined.
In other words, if you took every car off the road in Maine
and closed down every factory, Maine would still have a
pollution problem, including in beautiful sites such as Acadia
National Park, because of the effect of the prevailing winds.
So when I read that you are suggesting that a State like
Maine might need to compensate a polluter's State, I just don't
understand those comments. Could you explain what you meant by
that and whether you still hold to that viewpoint?
Ms. Dudley. Well, this is a time when I wish Senator Carper
were still here because that would be one that I wish I had not
said. This is one I wish I had taken back.
This is a perfect example of you can be an academic
theorist and you can talk, ``Well, in theory, we could get the
same result by the polluting State compensating the downwind
State or vice versa.'' That is not the way our statutes are
written, and if I were confirmed as Administrator of OIRA, I
assure you that is not the kind of proposal I would suggest.
Chairman Collins. So is this more of an academic exercise
to talk about the theoretical possibilities?
Ms. Dudley. Yes. I mean, it is applying the Coase theorem.
Coase was a Nobel Prize-winning economist, and that was his
theorem. But it clearly does not work from an equity
perspective or a fairness perspective.
Chairman Collins. Exactly.
Ms. Dudley. And I agree with you, and equity and fairness
are definitely something I think are important to understand in
regulation.
Chairman Collins. Let me turn to another clean air issue
that concerns me. In October of this year, just recently, the
EPA's Clean Air Scientific Advisory Committee unanimously
recommended that air quality standards for ozone need to be
substantially strengthened to protect human health,
particularly in sensitive subpopulations, for example, children
with asthma.
This Committee found that the health impacts in healthy
individuals at ozone levels below even the current standard
were significant and were cause for concern, and it is already
well known that sensitive individuals, such as the elderly with
breathing difficulties or children with asthma, are even more
susceptible than healthy individuals. Again, I recognize that
this was sometime ago, but in 1997, you argued that the ozone
standard should be set at a weaker level than even the current
level, which has now been shown to be insufficient to safeguard
the health of vulnerable populations.
In light of this new evidence--and I realize it is new
evidence since you wrote your comments--do you now believe that
there is enough evidence to support an ozone standard at least
as strong as, if not stronger than, the current standard?
Ms. Dudley. You are right, it was 10 years ago when I wrote
about ozone. And I do care about the air, having a son who has
suffered from asthma. I understand those issues. I have looked
at that. I have seen that, the Clean Air Science Advisory
Committee's letter, and I think it will certainly weigh in to
EPA's decision, particularly under the Clean Air Act.
Chairman Collins. I have talked a lot this morning about
the benefits of regulation, particularly in the environmental
arena. There are times, however, when excessive regulations,
costly regulations have a detrimental effect, and I want to
bring to your attention an example that affects the State of
Maine.
As you know, for centuries Maine has had a fishing industry
that is very important to our economy, to our way of life, and
to our heritage. And yet the fishing industry is endangered in
Maine because of excessive regulation that often seems to be
grounded in the desire to avoid lawsuits rather than in sound
scientific knowledge and expertise.
Currently, the National Marine Fisheries Service is
drafting a rule that could well have a detrimental effect on
Maine's lobster industry. I don't want to go into exhaustive
detail, and I realize this is not something that has probably
been on your radar screen. But it is a good example of a
regulation that has a noble goal, but would impose a tremendous
burden on the lobster industry in our State. The regulation
would require some gear modifications by requiring fishermen to
replace their current floating ground lines with sinking ground
lines. This is a costly change. Again, it has a worthwhile
purpose. It is intended to help reduce the risk of interaction
between fishermen and certain whales, and that is something
that we all care about. But there may well be a better way to
achieve that goal. The approach that the National Marine
Fisheries Service is taking is using outdated cost estimates
that do not reflect the true impact on our lobster industry.
Now, I realize this is probably a new issue to you, but it
seems to me that this is where OIRA could play an important
role of ensuring that there is a full analysis and in-depth
consideration of alternative methods of achieving the same goal
without imposing such an onerous burden on our lobster
industry.
If you are confirmed, do you pledge to take a look at this
rule and at any reasonable alternatives given the potentially
detrimental impact on our lobster industry?
Ms. Dudley. Yes, Senator, you are right. It is
inappropriate for me to comment specifically, but if I am
confirmed, I will definitely look at this and would love to
talk to you about it if you are interested.
Chairman Collins. Thank you. Senator Akaka.
Senator Akaka. Thank you, Madam Chairman.
Ms. Dudley, I would like to clarify one of your earlier
responses when I asked you about market failure. I looked up
``market failures,'' which is an economic term to describe when
markets do not allocate goods and services efficiently. And
normally the term is applied when the inefficiency is
particularly dramatic. The term may also be used to describe
situations where market forces do not serve the perceived
public interest.
When I asked you that question, you said that a lack of
information can lead to a market failure.
Ms. Dudley. Right.
Senator Akaka. I'd like to discuss this matter further.
What about inability to act because of economic factors? Can
the lack of economic resources lead to a market failure?
Ms. Dudley. I don't think it would fit the traditional
definition of market failure. Certainly, that is a role for the
government, but it probably does not fit the definition of
market failure.
Senator Akaka. Ms. Dudley, in May 2004, GAO issued a report
at my request on the number of data-mining activities in the
Federal Government. At that time, GAO found 36 agencies using
personal information obtained from the private sector in data-
mining activities. What policies and safeguards do you believe
should be in place to ensure the accuracy of information
obtained from the private sector?
Ms. Dudley. Well, there are several statutes that guide OMB
as well as agencies on those issues, including the Privacy Act,
the Paperwork Reduction Act itself, and if I am confirmed, I
would like to work with the other offices within OMB as well as
the agencies to make sure that if we are collecting
information, especially that is personally identifiable, we
need to make sure that we are consistent with the framework set
up in the Privacy Act and the specifics laid out in these other
acts.
Senator Akaka. Ms. Dudley, in 2001 and 2002, you and your
colleagues in the Mercatus Center submitted numerous
regulations to OIRA that you believed needed to be modified or
repealed. What methodology was used to determine whether these
existing regulations should be repealed, rescinded, or
modified? And would you use the same methodology if you are
confirmed as OIRA Administrator?
Ms. Dudley. Well, in 2001, when OMB asked for comments on
regulations that could be improved, we actually had already
filed comments with agencies. We had our Public Interest
Comment project operating for several years and had filed
comments with agencies. So we had done research on particular
rules, had suggestions for how to improve those rules,
alternatives that could make them better.
So when OMB asked for recommendations, we just sent one-
page summaries of all the rules on which we had done research.
So our list was not necessarily a priority list. It was a list
of here is some information that we have already done some
research on, and they were not necessarily saying you should
repeal it. They were saying there are smarter ways to deal with
it, and here is our research.
So that was the methodology in both of those cases. We
didn't scratch our heads and say, ``Gee, what could it be?'' We
really just supplied a list of what analysis we had already
done.
Senator Akaka. And you feel that if you head up OIRA, you
would use the same method?
Ms. Dudley. Actually, I would like to use the method that
is codified in President Clinton's Executive order and statute.
I do not plan to use any different methods.
Senator Akaka. Ms. Dudley, the Privacy Act and the E-
Government Act are the primary mechanisms for protecting the
privacy of citizens and legal residents. Do you believe that
the Privacy Act and the E-Government Act provide adequate
privacy protections?
Ms. Dudley. Well, the Privacy Act, as you know, is getting
pretty old. It is over 30 years old now, and yet from what I
understand, the framework that is in the act, which is collect
information and use it only for the purpose for which it was
collected, unless somehow otherwise authorized, that general
framework still seems to be working. And then as you have
mentioned, the E-Government Act, as with FISMA, the Clinger-
Cohen Act, several other statutes have updated it.
I think the bottom line is it is a constant challenge, and
privacy concerns are dynamic and ever-changing. And within the
framework provided by those acts, I think memoranda and working
with the CIOs in the agencies and OMB may be the best way to
deal with that. But I don't have all the answers and would love
to talk to you if you have some thoughts on that.
Senator Akaka. I thank you so much for your responses.
Thank you, Madam Chairman.
Chairman Collins. Thank you. Senator Carper.
Senator Carper. Sometimes when we have had people who have
been nominated by the President to serve as judges, Federal
judges, I have tried to understand where they are coming from,
especially if they do not have much of a judicial history, by
saying, well, whose decisions, who on the court do you admire,
and who do you see yourself sort of following in the footsteps
of.
Now, you are not going to have judicial decisions, but you
have a lot out there in terms of where you are coming from, but
I still want to ask a similar question, and maybe a two-parter.
In your view, what should the role of the Director of OIRA
be? How should it work and how should it play in the regulatory
process? And how might the approach that you take in this job
be different from the person who is not the incumbent, who I
believe is there as an interim, but his predecessor, John
Graham? So if you could take those on, I would appreciate it.
Ms. Dudley. I see the role of OIRA as coordinating across
agencies to make sure that one hand knows what the other hand
is doing in the regulatory world, providing the guidance and
the oversight. The agency has the ultimate authority for
issuing the regulations, as Senator Collins said at the outset.
So the OIRA role is more review and coordination.
My style tends to be more collaborative, just by nature,
and so I think--that is how I imagine that would be one thing
that would maybe--I don't know if I should say distinguish me
from the previous administrator because he was very effective.
But actually I know and actually have worked with all but one
of the administrators. I am teaching with Sally Katzen at
George Mason University, and I have worked with the others
either in OIRA or elsewhere. So I think there are some big
shoes to fill and a lot to build on, and so I hope to be able
to take characteristics from each of them if I am confirmed.
Senator Carper. All right. Sometimes I like to say, one of
my favorite sayings--Senator Collins has heard me say this a
time or two--in politics our friends come and go, but our
enemies accumulate. [Laughter.]
Senator Carper. You have had a chance, as we all have up at
this table, to collect a few enemies. When my enemies criticize
me, in some cases they are totally without any validity, but
sometimes they strike tellingly true. And folks have been
critical of your nomination and of your suitability for this
position. When some folks are critical of you, which of the
criticisms do you think come closest to being maybe true or
have some basis in fact? How would you rebut those or address
them?
Ms. Dudley. I think generally I would say please look at my
writing and please meet me. I mean, that is one thing. I guess
I would rebut them by saying if people are concerned that I
will not be open and transparent, I can assure you that is not
true because if I am confirmed as Administrator, I would
invite--there was a letter that was signed against me. I
haven't met anybody who signed that letter, but the letters
that have been signed for me, I know all those 50 academics. I
know the Nobel Prize winner; I know the OIRA Administrators who
have all written supportive letters. I don't know anybody on
the other letter, and I hope to change that if I am confirmed.
Senator Carper. I wonder if I could just restate my
question. When people criticize you, when you read criticisms
people have made of you, which of the criticisms that you have
heard have some basis in fact? How would you speak to those?
Ms. Dudley. I guess a criticism that I believe that market
forces work. It is true. I believe in people. I believe in
people's ability to make decisions. I respect diversity, and I
respect people. And so I resist one-size-fits-all standards
that do not understand that diversity and that people have
different needs.
Senator Carper. OK. Let me ask a question with respect to
your philosophy. What is your philosophy when it comes to when
an agency should step in and propose a regulation? I serve on
the Environment and Public Works Committee. We have been very
much involved with the President's Clear Skies proposal, which
we defeated in Committee. EPA responded by issuing regulations
to try to do through regulations what Clear Skies would have
otherwise done or not done.
But what kind of things do you think an agency like EPA
ought to consider before putting forward regulations on clean
air, for example? And assuming they are authorized to act, when
would it be appropriate for them to do so, in this case, EPA?
And if confirmed, how would you apply this philosophy to your
work?
Ms. Dudley. I would say the first criteria should be the
statutory mandate and what does the statute require. And then
actually my philosophy really fits very well with the
guidelines that have been issued by the past several
Presidents, and that is, first understand why we are seeing the
problem, and it is this notion of root cause. What is the root
cause? I really do think you need to know what the root cause
of the problem is before you can address it because otherwise
you may be just putting on a Band-Aid and actually having
unintended consequences.
The third step would be let's look at some alternatives.
Now, I will admit that as a writer, I think out of the box, but
I promise not to think that far out of the box (if confirmed).
You missed my apology to you in response to a question of
Senator Collins earlier.
Senator Carper. An apology to me? I hate to miss those.
Ms. Dudley. She identified something that I wished that I
hadn't said, but it was thinking out of the box. And I think as
regulators we need to challenge our ideas, but obviously that
box has to be constrained with what the statutory constraints
are. And then the next step would be let's try to look and see
what we think the consequences are under different scenarios,
then understand who is bearing the costs and the benefits. And
I have run you out of time.
Senator Carper. All right. Thanks very much.
Ms. Dudley. Thank you.
Chairman Collins. Ms. Dudley, we haven't talked very much
this afternoon about the critical role that OIRA plays in
helping to safeguard the confidentiality and the security of
private information. This is a less visible role of OIRA, but
in this electronic age, it is an incredibly and increasingly
important role.
Many Federal agencies in the course of carrying out their
missions must have access to or store personal identifying
information of citizens, including birth dates, addresses,
Social Security numbers. In the past year, we have seen serious
breaches in agencies that have exposed citizens to identity
theft. Probably the most widespread one that affected millions
of American citizens occurred at the Veterans Administration,
and I am sure you are somewhat familiar with that.
OMB has issued some guidelines to improve information
security, but what more do you think can be done to ensure that
personal information that is shared by the citizens of this
country with Federal agencies, whether it is Social Security or
Medicare or the IRS or the VA, is truly protected from an
unauthorized release?
Ms. Dudley. You are right, I mean, this is important, and
there is certainly room to improve. As I understand it, this is
a responsibility within OMB that is shared within different
parts of OMB. The Deputy Director issued a memo about a year
ago requiring agencies to look at not just the information that
they use but how they store it, evaluate how well it is
working. I believe their responses are due soon, if they are
not already in. I think that might give the office a better
look at understanding how do we do this and understand that it
is a life-cycle approach. When you gather that personal
information, you need to know how it is going to be stored and
how it is going to be used to try to avoid situations like the
VA laptops that you mentioned. And so I would like to work with
the other parts of OMB as well as the agencies to try to do
better, if I am confirmed.
Chairman Collins. Another challenge that Federal agencies
and departments, particularly the Department of Homeland
Security, have is striking the right balance between privacy
and security. We are seeing the Department of Homeland Security
try to implement new programs at the border, the secure flight
program, that require the collection of considerable amounts of
private information.
In general, what is your philosophy about how we strike the
right balance between gathering information that we need about
individuals and yet not creating vast government databases that
could be used for inappropriate purposes?
Ms. Dudley. I think it is a difficult challenge, and it is
not a new challenge, but it is additionally challenging in
recent years. So I think it is something that needs to be faced
more.
As I say, I think that the framework that is set up in pre-
existing acts recognizes the need for those balances. So I
imagine it requires a lot of serious case-by-case analysis
about specific choices that we have and whether you can achieve
the same security with less breach of privacy or understand
what the trade-offs are, because there are serious trade-offs,
and Americans want both.
Chairman Collins. It is a very difficult trade-off because,
obviously, the 9/11 Commission and other experts have pointed
out that we did not do a good enough job with information
sharing and with collecting as much information as possible and
disseminating that information about those who would do us
harm.
The problem becomes figuring out who are the individuals
who would do us harm versus law-abiding individuals for whom
there is no need to collect information that involves a certain
breach of privacy. And I think that is going to be a tremendous
challenge throughout the Federal Government in the coming
years.
I do have a number of additional questions on everything
from how the OIRA Director would interact with the E-Government
Director and other more technical issues, which I am going to
submit for the record. I would like to turn to my colleagues
and give them an opportunity for any closing questions that
they might have.
Senator Akaka.
Senator Akaka. Thank you very much, Madam Chairman.
Ms. Dudley, you said that you have always tried to be open
and transparent and you would like to continue that. I
appreciate that since I believe OIRA should operate in an open
and transparent manner.
In 2003, the GAO reported that the changes agencies made to
regulations at OIRA's request were not always available. In
addition, although OIRA has said it can have its greatest
impact on agencies' rules during informal reviews, agencies are
only required to disclose changes made at OIRA's request during
formal review.
If confirmed, would you institute a policy whereby agencies
disclose changes recommended by OIRA during informal review?
Ms. Dudley. One of the things I have complimented OIRA on
is its increased transparency because I do think sunshine makes
for better government, and I think the work that it does is
positive, and it should be open. So if I am confirmed, I am
willing to discuss any reasonable request to see if there is a
need to actually increase that transparency. So I am definitely
willing to talk with you if I am confirmed.
Senator Akaka. Do you have any ideas to further improve the
transparency of OIRA's review process?
Ms. Dudley. I am not at OIRA now and I have not been at
OIRA in a long time, so I am not familiar with exactly how
things work. But what I have appreciated is the posting on the
website and the ability to track a regulation to see where it
is in the review process. But I am sure there are more things
that can be done. I just do not have specific suggestions.
Senator Akaka. It is well known that the former OIRA
Administrator, John Graham, sent what are called ``prompt
letters'' to agencies to suggest that the agency develop
regulations in a particular area or to encourage ongoing
regulatory efforts. If confirmed, would you issue prompt
letters? And if so, which areas of regulation would you
encourage?
Ms. Dudley. I actually do not have something specific in
mind, as I mentioned in response to a question earlier. My
personality tends to be more collaborative, but I know--the
prompt letters were something that I thought actually were a
good thing that Administrator Graham did. One in particular
that I thought was important was to FDA on a trans fat
regulation, and the prompt encouraged FDA to provide more
information to consumers on trans fats. And that was one that I
thought was a positive step.
Senator Akaka. Thank you, Ms. Dudley. Madam Chairman, I
have other questions that I may submit for the record. Thank
you very much.
Ms. Dudley. Thank you.
Chairman Collins. Thank you, Senator. Senator Carper.
Senator Carper. Just maybe one or two things in closing. In
Senator Akaka's comments, he mentioned the word ``transparent''
and presented it in a way that I think a lot of us think of
transparency today. When we say someone is transparent or a
process is transparent, we think of it in positive terms. I am
old enough to remember whenever accused of being transparent,
it was not a compliment. It is interesting how things change.
I was sitting here watching you respond to these questions,
Ms. Dudley, and it is hard not to see your boys here sitting
behind you, and I know that if my sons at their age had to be
here and sit--this is worse than church. [Laughter.]
Senator Carper. You could not pay them to endure this for a
couple of hours. At least in church you get to stand up from
time to time and maybe sing or pray or close your eyes, or
whatever. But they have done a very fine job in holding up
their end of the bargain in all of this.
Gentlemen, I don't know if your mom is going to be
confirmed or your wife is going to be confirmed, but if she is,
we thank you for your willingness to share your mother and your
wife with the people of our country.
You have held a number of important and responsible
positions to date, but if you end up in this one, you are going
to be what I call ``shooting with real bullets.'' And that is
not to say you have been shooting with blanks for the earlier
part of your life, but you will have a fair amount of say as to
the direction that we are able to take.
We pass laws, and they are kind of like a skeleton, if you
will, and then meat on the bones is the regulations that are
adopted in response to those laws. What you have been nominated
to do here is an important thing, and we appreciate your time
and responses to our questions. But you may be in a position to
decide what kind of air these guys have to breathe and what
kind of fish they are going to have to eat and what kind of
oceans they are going to have to swim in and what kind of
pollution is going to be coming out of the cars or trucks or
vans that they drive. It is important stuff, and I would just
ask that you keep that in mind.
You mentioned collaboration, you are into collaboration.
Frankly, I would like to think that is one of my strong suits
as well. My colleagues might deny that, but that is one of the
things I try to do. And in the nature of the job that you might
some day hold, that is a quality you do not want to let go.
Thanks very much.
Ms. Dudley. Thank you, Senator.
Chairman Collins. Thank you.
Ms. Dudley, I want to thank you for appearing before the
Committee today and for your cooperation with the Committee's
process. I very much appreciate your frank responses to the
many questions that you have been asked throughout this
process. I know it is a long and involved one, and certainly
your many writings have given us a lot to ponder.
I do want to thank my staff for their hard work and the
Minority staff for their hard work on this nomination. Given
that the nominee did have voluminous writings, it was a great
deal of work for the staff to read through all of them, and
they probably could write a book on your writings at this
point.
I also do appreciate your willingness to serve. I think
that many people looking at the contentious nomination process
that too often seems to occur these days would decide that they
were better off staying in an academic environment. Not to say
that academia is not contentious, but I know it is very
different to have a public nomination process, and I appreciate
your willingness to put yourself forward and to consider
serving in this role.
Without objection, the hearing record will be kept open
until 5 p.m. on Wednesday. I do anticipate the submission of
additional questions for the record. Senator Lieberman was not
able to be here today, but as you know, he has a great interest
in your nomination, and I suspect that he will have some
follow-up questions, as will I and some of the other Members.
I, too, want to join Senator Carper in thanking your family
for being here and thanking them for their willingness to
endure this process as well and for your commitment to public
service.
This hearing is now adjourned.
[Whereupon, at 4:01 p.m., the Committee was adjourned.]
A P P E N D I X
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