<DOC> [108th Congress House Hearings] [From the U.S. Government Printing Office via GPO Access] [DOCID: f:86439.wais] HOW TO IMPROVE REGULATORY ACCOUNTING: COSTS, BENEFITS AND IMPACTS OF FEDERAL REGULATIONS ======================================================================= HEARING before the SUBCOMMITTEE ON ENERGY POLICY, NATURAL RESOURCES AND REGULATORY AFFAIRS of the COMMITTEE ON GOVERNMENT REFORM HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTH CONGRESS FIRST SESSION __________ MARCH 11, 2003 __________ Serial No. 108-3 __________ Printed for the use of the Committee on Government Reform Available via the World Wide Web: http://www.gpo.gov/congress/house http://www.house.gov/reform ______ 86-439 U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 2003 ____________________________________________________________________________ For Sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpr.gov Phone: toll free (866) 512-1800; (202) 512ÿ091800 Fax: (202) 512ÿ092250 Mail: Stop SSOP, Washington, DC 20402ÿ090001 COMMITTEE ON GOVERNMENT REFORM TOM DAVIS, Virginia, Chairman DAN BURTON, Indiana HENRY A. WAXMAN, California CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California ILEANA ROS-LEHTINEN, Florida MAJOR R. OWENS, New York JOHN M. McHUGH, New York EDOLPHUS TOWNS, New York JOHN L. MICA, Florida PAUL E. KANJORSKI, Pennsylvania MARK E. SOUDER, Indiana CAROLYN B. MALONEY, New York STEVEN C. LaTOURETTE, Ohio ELIJAH E. CUMMINGS, Maryland DOUG OSE, California DENNIS J. KUCINICH, Ohio RON LEWIS, Kentucky DANNY K. DAVIS, Illinois JO ANN DAVIS, Virginia JOHN F. TIERNEY, Massachusetts TODD RUSSELL PLATTS, Pennsylvania WM. LACY CLAY, Missouri CHRIS CANNON, Utah DIANE E. WATSON, California ADAM H. PUTNAM, Florida STEPHEN F. LYNCH, Massachusetts EDWARD L. SCHROCK, Virginia CHRIS VAN HOLLEN, Maryland JOHN J. DUNCAN, Jr., Tennessee LINDA T. SANCHEZ, California JOHN SULLIVAN, Oklahoma C.A. ``DUTCH'' RUPPERSBERGER, NATHAN DEAL, Georgia Maryland CANDICE S. MILLER, Michigan ELEANOR HOLMES NORTON, District of TIM MURPHY, Pennsylvania Columbia MICHAEL R. TURNER, Ohio JIM COOPER, Tennessee JOHN R. CARTER, Texas ------ WILLIAM J. JANKLOW, South Dakota BERNARD SANDERS, Vermont MARSHA BLACKBURN, Tennessee (Independent) Peter Sirh, Staff Director Melissa Wojciak, Deputy Staff Director Randy Kaplan, Senior Counsel/Parliamentarian Teresa Austin, Chief Clerk Philip M. Schiliro, Minority Staff Director Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs DOUG OSE, California, Chairman WILLIAM J. JANKLOW, South Dakota JOHN F. TIERNEY, Massachusetts CHRISTOPHER SHAYS, Connecticut TOM LANTOS, California JOHN M. McHUGH, New York PAUL E. KANJORSKI, Pennsylvania CHRIS CANNON, Utah DENNIS J. KUCINICH, Ohio JOHN SULLIVAN, Oklahoma CHRIS VAN HOLLEN, Maryland NATHAN DEAL, Georgia JIM COOPER, Tennessee CANDICE S. MILLER, Michigan Ex Officio TOM DAVIS, Virginia HENRY A. WAXMAN, California Dan Skopec, Staff Director Barbara F. Kahlow, Deputy Staff Director Melanie Tory, Clerk Alexandra Teitz, Minority Counsel C O N T E N T S ---------- Page Hearing held on March 11, 2003................................... 1 Statement of: Graham, John D., Administrator, Office of Information and Regulatory Affairs, Office of Management and Budget........ 9 Miller, James C., III, former Director, Office of Management and Budget, chairman, Capanalysis Group; Robert Hahn, director, AEI-Brookings Joint Center for Regulatory Studies; Jim Tozzi, former Deputy Administrator, Office of Information and Regulatory Affairs, Office of Management and Budget, advisory board member, Center for Regulatory Effectiveness; Lisa Heinzerling, professor of law, Georgetown University Law Center; and Rabbi Daniel J. Swartz, executive director, Children's Environmental Health Network.................................................... 41 Letters, statements, etc., submitted for the record by: Graham, John D., Administrator, Office of Information and Regulatory Affairs, Office of Management and Budget: Information concerning ranking regulatory investments in public health.......................................... 25 Prepared statement of.................................... 11 Hahn, Robert, director, AEI-Brookings Joint Center for Regulatory Studies, prepared statement of.................. 51 Heinzerling, Lisa, professor of law, Georgetown University Law Center: Information concerning measuring criteria................ 142 Prepared statement of.................................... 93 Miller, James C., III, former Director, Office of Management and Budget, chairman, Capanalysis Group, prepared statement of......................................................... 44 Ose, Hon. Doug, a Representative in Congress from the State of California, prepared statement of....................... 3 Swartz, Rabbi Daniel J., executive director, Children's Environmental Health Network: Information concerning measuring criteria................ 140 Prepared statement of.................................... 119 Tozzi, Jim, former Deputy Administrator, Office of Information and Regulatory Affairs, Office of Management and Budget, advisory board member, Center for Regulatory Effectiveness: Information concerning the Regulatory Cost Accounting Act of 1980................................................ 72 Prepared statement of.................................... 85 HOW TO IMPROVE REGULATORY ACCOUNTING: COSTS, BENEFITS AND IMPACTS OF FEDERAL REGULATIONS ---------- TUESDAY, MARCH 11, 2003 House of Representatives, Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs, Committee on Government Reform, Washington, DC. The subcommittee met, pursuant to notice, at 2 p.m., in room 2154, Rayburn House Office Building, Hon. Doug Ose (chairman of the subcommittee) presiding. Present: Representatives Ose, Janklow, Miller, Tierney and Cooper. Staff present: Dan Skopec, staff director; Barbara Kahlow, deputy staff director; Melanie Tory, clerk; Yier Shi, press secretary; Alexandra Teitz, minority counsel; and Jean Gosa, minority assistant clerk. Mr. Ose. Good afternoon. Welcome to today's hearing on the Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs. I am pleased to be here with my colleagues at this hearing. In fall of 2001, the Small Business Administration released a report which estimated that, in the year 2000, Americans spent $843 billion to comply with Federal regulations. This report concluded that if every household received a bill for an equal share, each would have owed $8,164. The report also found that in the business sector, those hit hardest by Federal regulations are small businesses. It stated firms employing fewer than 20 employees face an annual regulatory burden of $6,975 per employee, a burden nearly 60 percent above that facing a firm employing over 500 employees. Regulations add to business costs and decreased capital available for investment. In September 2002, another study entitled, ``Compliance Costs of Federal Workplace Regulations: Survey Results for U.S. Manufacturers,'' revealed that, in 2000, manufacturers spent an average of $2.2 million per firm, or $1,700 per employee, just to comply with Federal workplace regulations. Because of congressional concern about the increasing costs and incompletely estimated benefits of Federal rules and paperwork, in 1996, Congress required the Office of Management and Budget, which we're going to refer to from now on as OMB, to submit its first regulatory accounting report. In 1998, Congress changed the annual report's due date to coincide with the President's budget. Congress established a simultaneous deadline so that Congress and the public could be given an opportunity to simultaneously review both the on-budget and off-budget costs associated with each Federal agency imposing regulatory or paperwork burdens on the public. In 2000, Congress made this a permanent annual reporting requirement. The law requires OMB to estimate the total annual costs and benefits for all Federal rules and paperwork in the aggregate, by agency, by agency program, and by major rule, and to include an associated report on the impacts of Federal rules and paperwork on certain groups, such as small business. Today, we will examine OMB's draft sixth annual regulatory accounting report, which was published on February 3, 2003, the same day as release of the President's budget. In addition, we will discuss how to improve compliance with the statutory requirements for an accounting statement by agency and by agency program and for an associated report on impacts. Data by agency and by agency program are important for the public to know the aggregate costs and benefits associated with each agency and each major regulatory program. For example, what are the aggregate costs and benefits of the requirements imposed by the Environmental Protection Agency or the Labor Department's Occupational Health and Safety Administration? Is there an alternative approach for EPA or OSHA to more effectively, with less burden on the public and less cost to the public, accomplish an intended objective? From September 1997 to February 2003, OMB issued five final and one draft regulatory accounting reports. All six failed to meet some or all of the statutorily-required content requirements. For example, all six were not presented as an accounting statement, and the February 2003 did not include the associated report on impacts. However, OMB has progressively made improvements, such as adding agency-level detail for eight agencies in March 2002 and adding agency program-level detail for seven major regulatory programs in February 2003. For OMB's Information Collection Budget and for the President's budget, OMB tasks agencies annually with preparing paperwork and budgetary estimates respectively for each agency, bureau and program. OMB uses the Information Collection Budget to manage the burden of Federal paperwork imposed on the public. In contrast, for Federal regulations, OMB does not similarly task agencies annually with preparing cost-benefit estimates for the agency as a whole and for each of the agency's major regulatory programs. After our March 2002 hearing, I recommended that OMB issue annual regulatory accounting bulletins to require agency, bureau and program estimates. This would assist OMB in preparing more complete annual regulatory accounting statements. To date, OMB has not done so. I'm going to enter the rest of my statement in the record. I do want to welcome our witnesses. I look forward to their testimony. My time has expired. [The prepared statement of Hon. Doug Ose follows:] [GRAPHIC] [TIFF OMITTED] T6439.001 [GRAPHIC] [TIFF OMITTED] T6439.002 [GRAPHIC] [TIFF OMITTED] T6439.003 [GRAPHIC] [TIFF OMITTED] T6439.004 Mr. Ose. I'd like to recognize the gentleman from Massachusetts for the purpose of an opening statement for 5 minutes. Mr. Tierney. Thank you, Mr. Chairman. Dr. Graham, thank you for joining us again. I apologize that I have to leave after the opening statement. Certainly it is no disrespect, and I know that you've been kind enough and gracious enough to make yourself and your staff available whenever we need to talk to you, and I appreciate that. Mr. Chairman, I want to thank you for holding today's hearing. Over the past several decades, the United States has made great strides in protecting public health and the environment. Workplaces are safer than those of our parents. Most of our children are growing up with cleaner air, safer drinking water and safer products. Laws, such as the Clean Air Act, the Safe Drinking Water Act and the Occupational Health and Safety Act, have made this progress possible. But, the day-to-day improvements in all these areas are due to implementing regulations issued by government agencies. While the Clean Water Act calls for fishable and drinkable waters, it's the EPA's regulations that have cleaned up our rivers by requiring each facility to limit its pollution discharges. Over the years, regulated industries have waged an ongoing battle against government mandates to protect health, safety and the environment. The public overwhelmingly supports strong regulatory protections in these areas. As a consequence, they're more rarely compelled to mount a frontal assault on popular laws, such as the Clean Air Act. Instead, industry is increasingly focused on subtly influencing the regulatory process. This background is critical context for understanding innocent-sounding regulatory reform proposals. But, we hear today that the White House Office of Information and Regulatory Affairs improves the efficiency of government by stringently analyzing and reviewing regulations and assessing the overall burdens that regulations impose on society. Unquestionably, there is room for improvement in regulation, but, for many advocates of stringent regulatory review, the real underlying goal of such reviews is not better regulation, but less regulation. Many of the same corporations that have spent millions of dollars to lobby Congress and Federal agencies against regulatory requirements fund some of the institutions we will hear from today. My constituents want to know the government is acting wisely on their behalf. They want to protect the environment, but they don't want to shut down industry. They are willing to pay a bit more for products so their children won't get asthma. They want a safe workplace, but they don't want their employer to go out of business. These are the tradeoffs that regulation requires, and the regulatory agencies make these tradeoffs every day using information provided by every interested party. What my constituents don't want is a disguised and systematic assault on regulations that protect public health and the environment. So, Mr. Chairman, I look forward to receiving the testimony from the witnesses on this issue. We'll read it, and my staff, of course, will be here throughout the hearing. And, I ask unanimous consent to include relevant materials in the record. Mr. Ose. Without objection. Mr. Tierney. Thank you. Mr. Ose. The gentleman from South Dakota for the purposes of an opening statement for 5 minutes. Mr. Janklow. Thank you very much, Mr. Chairman. I'm going to be extremely brief. As a new Member of Congress, and a new member of this committee, I look forward to working under your leadership on a bipartisan basis to look at these kinds of issues. I find it absolutely incredible that this country could be spending approximately $850 billion a year through its various business entities and organizations to comply with Federal mandates and Federal rules with respect to, basically for all practical purposes, bookkeeping. This is unbelievable. This is one of the reasons that we find ourselves continuously in a more uncompetitive atmosphere. There isn't any question that it is not an issue of a clean environment. I have five grandchildren. They drink the water. They bathe in it. Their food is cooked in it. We need a safe workplace for everyone. There isn't any question about that. But, the real question is to do what we need to get done in the environmental sense, to do what we need to get done in the safe working area sense, to do what we need to get done in the regulatory sense, does it really take approximately $850 billion a year for people to comply? Is there not a more efficient, more effective way that it can be done? Is there not a more reasonable, productive way that it can be done without having incurred this type of expense? If, after thorough, honest examination, we reach the conclusion, all of us, that it can't be done any better, then we ought to continue to do it this way, but, if the truth is that there is a more efficient, more effective, more productive way to do it, and at the same time accomplish the goals and objectives that we set for ourselves as a society, then we're honor-bound and duty-bound to try and find that way and get it implemented as quickly as possible. So, I look forward to the enlightenment we'll get from these witnesses, the discussion under your leadership, Mr. Chairman, so that we can move forward on this to try and see if there isn't a better way to deal with the regulatory environment that our society has to deal with. Thank you. Mr. Ose. I thank the gentleman, and look forward, as our new vice chairman---- Mr. Janklow. Thank you. Mr. Ose [continuing]. To your efforts here. I also want to welcome the gentlelady from Michigan, Candice Miller. Do you have a statement you would like to make? Mrs. Miller of Michigan. I do not, Mr. Chairman. Mr. Ose. OK. We're grateful for your attendance and participation in this subcommittee. Now, for the benefit of the witnesses, we're going to--I just want to make sure we go through the ground rules here carefully. We have received your written testimony. We've read it. If we haven't read it, it's not your fault, but somebody else's. We're going to be very attentive to the 5-minute rule here so that we can get to Member questions. If there are more Member questions than can be accommodated within the 5-minute rule, we'll have a second round of questions. I am going to be very attentive to the 5-minute rule, and the gavel is going to be right next to me. So, I want to make sure everybody understands that going in. Again, we do appreciate you submitting your testimony in writing beforehand. It has been read. Trust me. I read it. I read it again this morning. The other thing here is that we, as a matter of course, swear in all of our witnesses. So our first panel, Dr. Graham, if you would please rise. [Witness sworn.] Mr. Ose. Let the record show that the witness answered in the affirmative. Dr. Graham joins us. He is the Director of the OIRA--excuse me, the Administrator. I stand corrected. He has been here numerous times to visit with us, both in committee and over the phone. We're always grateful for his input. Dr. Graham, thank you for coming. You're recognized for 5 minutes. STATEMENT OF JOHN D. GRAHAM, ADMINISTRATOR, OFFICE OF INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND BUDGET Dr. Graham. Thank you, Mr. Chairman. I look forward to the opportunity to discuss our annual report to the Congress on the costs and benefits of Federal regulation. We have, as you know, a draft report open for public comment now, and I want to just highlight a few of the key features of that report. For the first time, as you note, Mr. Chairman, this report was released at the same time as the administration's budget. We did this, as you know, in substantial measure upon your request. We agree with you that this will help appropriators do their work of tailoring budgetary evaluations to performance of programs, and certainly costs and benefits are an important element in the performance of programs. Second of all, for the first time this report covers the entire past 10 years of Federal regulatory activity. We have, in fact, looked at over 50 major rules during this period, and there is good news in this report. The benefits of these major rules are estimated in the range of $135 billion per year, with an upper bound maybe as high as $218 billion, while the costs are in the range of $38 to $44 billion. Keep in mind that these figures don't include the nonquantified benefits and costs of these regulations. Why does this year's report offer some good news compared to previous reports? The answer is found in a third feature of the report. For the first time, we have broken down the performance of these regulations not just by agency, but by the program within each agency, and it turns out there is one particular program in the Federal Government that is responsible for the majority of all the benefits accounted for by all regulations in the Federal Government, and that is the Clean Air Program of EPA's Office of Air and Radiation. And, indeed, if you take this one program out of the statistics, the remaining programs have a much more questionable balance of benefits and costs. They do exceed the cost, but not by very much. Now, it turns out that we are actually trying to expand the authority and resources for this particular program. As you know, in his State of the Union Address, President Bush asked for Congress to pass the Clear Skies Initiative, and this would accomplish a 70 percent reduction in power plant pollution over the next 15 years. And, this is accomplished not through traditional command-and-control, litigation-oriented regulation. It is accomplished through market-based cap and trade programs, such as those accomplished in the Clean Air Act Amendments of 1990. This is what we mean by more efficient and innovative regulatory approaches. Finally, for the first time OMB guidelines on regulatory analysis and accounting have been made available for public comment. We have previously gotten expert review and interagency review, but this is the first time we are asking anyone who wants to offer comments on how we can improve the way we analyze regulations and review the analyses of agencies. In these guidelines, we recognize that the value of these benefit and cost numbers is only as good as the quality of the science and analysis that underpins them, and hence we encourage people to participate in the process of improving these guidelines. Mr. Chairman, I've looked forward to working with you and other members of the subcommittee to continue improvements in the report. I heard your opening statement. We realize we don't have an A grade at the present time, but we would like to argue that we are in a trend-line of improvement. Thank you very much. Mr. Ose. Thank you, Dr. Graham. We are cognizant of the improvement that has been made. So we're grateful for that. [The prepared statement of Dr. Graham follows:] [GRAPHIC] [TIFF OMITTED] T6439.005 [GRAPHIC] [TIFF OMITTED] T6439.006 [GRAPHIC] [TIFF OMITTED] T6439.007 [GRAPHIC] [TIFF OMITTED] T6439.008 [GRAPHIC] [TIFF OMITTED] T6439.009 [GRAPHIC] [TIFF OMITTED] T6439.010 [GRAPHIC] [TIFF OMITTED] T6439.011 Mr. Ose. We're going to go to questions. Appreciate the brevity of your comments, given the testimony you've submitted. I'm going to claim my time first. The law requires OMB to include in its annual accounting statement data separately for each agency and for each agency regulatory program. The February 3rd draft report seems to be missing data on many agencies and most agency regulatory programs. If you'll look over here on the screen and on the stand, the ones in red are the salient or the related programs that we're talking about there. At last year's hearing on March 12th and in two letters to OMB since then, one on March 27th of last year and one on January 3rd of this year, I asked if OMB would issue an annual OMB bulletin to the agencies which would require agency estimates of aggregate and new regulatory burden as it does in annual OMB bulletins to the agencies for aggregate and new paperwork burden. To date, I'm not aware of OMB having done so, and we do have some legislation to attempt to address that. But, my question is there must be some reason why OMB has not done that, if that is the case, and I'd like to know why. That is the first part of the question. Without agency input, how does OMB expect to include a complete aggregate agency-by- agency and agency program detail in its subsequent annual regulatory accounting reports? Dr. Graham. Mr. Chairman, we have looked at all major regulations of all of the agencies for the last 10 years. There are no missing agencies. There are no missing major rules, to the best of our knowledge. We differ on whether the nonmajor rules should somehow be attempted to be quantified and included in this calculation, and before you seek the legislation that you have referred to, we urge you to consult with people in the agencies and make sure that such information even exists. As you know, the requirement for a cost-benefit analysis only applies to the economically significant or major rules that are included in the report. So, we could pass a piece of legislation and ask for this information, but it's not obvious that it is there for the agencies to provide, and I can assure you that we at OMB don't have that information, and we aren't in a position to provide it to you, sir. Mr. Ose. You'll note that we haven't dropped the legislation yet, so that consultation will take place before we do so. Dr. Graham. Yes. Mr. Ose. And I want to make sure everybody understands, in terms of a major rule, just for the edification, that is the $100 million threshold? Dr. Graham. Yes. For the--there are lawyers in the room, so I guess I have to be very careful about this, but there's a subtle distinction between major rule and an economically significant rule, and I could not explain that to you in detail, but both of them have as an important component, this $100 million per year threshold of economic impact. And, we have tried to identify all of the major rules for the last 10 years that meet that threshold and have at least some quantification of benefits and costs, and those are included in this year's report. Mr. Ose. All right. Thank you. My next question is rather lengthy. I'm going to go ahead and yield time to my good friend from South Dakota for the purpose of questioning. Mr. Janklow. Dr. Graham, I believe your testimony was that the costs for $135 to about $218 billion in benefit under the rules you have examined were from $38 to $44 billion; is that correct? Dr. Graham. Correct. Mr. Janklow. And, you said you've looked at all of the basic rules, the major rules that have a big cost impact within the government; is that correct? Dr. Graham. Well, that have had a big cost impact and for which agencies have estimated costs. Mr. Janklow. OK. How do you square that number with the $845 billion number that the Small Business Administration had for compliance? Dr. Graham. Yeah. I think the effort in the Small Business Administration report is to look at all of the costs of all regulations, not just major regulations, and all of the transfer costs in the Federal budget that are stimulated by regulation. So that is really a different kind of number. Our focus here is on regulations that impact the private sector and State and local governments. We don't include in our numbers regulations that are primarily budgetary impact regulations. Mr. Janklow. All right. So it's not apples to apples. Dr. Graham. It's not apples to apples. Mr. Janklow. Sir, in doing the analysis that you and your agency do, have you been able to find any areas of suggestion that you think can be done as well, more efficiently, more productively or in a better cost-wise manner? I mean, the name of the game is are the rules and regulations that are required the cheapest possible cost? Where are we doing it wrong? Dr. Graham. Well, I think the classic example is the one I mentioned in my opening statement. We currently have a clean air regulatory system that requires electric utilities to run through highly elaborate permitting processes and be subject to litigation every time they make a renovation or a repair on their facility. Instead of that, the President has proposed a market-based training program with a cap on national emissions, and that will achieve pollution reductions at much lower costs than the current regulatory system that we have. Mr. Janklow. OK. Let's just take that as a given for a moment, put it on the shelf. What else can bring about a savings in these megabillions? Dr. Graham. Well, in last year's report, which was published in December of last year, we described the process that we have under way to review 316 regulations and guidance documents that were nominated by the public to be looked at for purposes of your question. Are there ways that these regulations could be modified or in some cases rescinded or in some cases strengthened in order to overall improve public benefit? And, we're all now meeting with each of the major agencies that is responsible for these rules, and it is quite a substantial undertaking. In this document, which I think your staff has a copy of, is the appendix to that report, and it has 316 examples of rules or guidance documents nominated by the public. Mr. Janklow. How many of those would you say are, if I can use the phrase, politically explosive? Dr. Graham. I suspect you and the chairman or the subcommittee are probably a better barometer of that than I am, but we're looking through each one of them on the merits, costs and benefits and working with the agencies to make choices. Mr. Janklow. I'll just end this round with this, sir, but I guess what I'm trying to get at is I realize the political sensitivity in this area where we're treading. I think we all understand that. Are there any things that we can do better that we could find some unanimity on? Dr. Graham. Well, I don't know the answer to that question, and quite frankly, we're not pursuing the process of regulatory reform from that particular perspective. We're looking at each of these for the purposes of whether we think you can make a benefit-cost case for a smarter regulation or in some cases no regulation at all, and, if we can make that case, you've noticed, I'm sure, that we're willing to take a little controversy in order to accomplish that. And, that is the way we feel about it in this administration. Mr. Janklow. Thank you. Mr. Ose. I thank the gentleman. Dr. Graham, if I could go back to followup on my first question. The discussion we had there talked about a 10-year time period from 1992 to 2002 relative to the major rules that were the subject of that. However, there is a question about rules issued, say, since February 1981 when President Reagan issued Executive Order 12291. Now, the report here does not include any of that period from February 1981 to October 1992, and I'm trying to figure out if OMB has taken any steps to include the available data for the still active major rules that were issued in that period and, beyond that, any estimates for still active major rules issued before 1981. Now, I understand that is a heck of a question because of the complexity of calculating that, but I'm just curious as to the status of your efforts in those two areas. Dr. Graham. We have not, Mr. Chairman. Mr. Ose. OK. Are there any plans to? Dr. Graham. Well, to be candid with you, Mr. Chairman, we are not convinced that the costs and benefit information that was estimated prior to the development of those regulations in 1985 or 1975 is really a very good quality scientific indicator of what the costs and benefits of those regulations are today, and hence what we have put out for public comment is a proposal that we will present this information to the public on a 10- year rolling basis. So, each year, we will tell you for the 10 previous years what those major rules, costs and benefits are. But as a rough surrogate, we would argue that, if it is older than 10 years old, we can't really use the information that was generated and have that much confidence in it. And, we're taking public comment and peer review on that position as we speak. Mr. Ose. OK. One of the interesting things in every testimony here speaks directly to your point there, and that is the quality of the assumptions underlying every agency submittal to you, you know, is it hard or is it somewhat malleable? And, that is something that I kind of sit in my office and think about, and I can't even imagine the challenge that you have, but I know that we're making progress. The other question I'd like to ask is that the law requires OMB to submit an analysis of impacts of Federal regulation on State, local and tribal government. Now, does OMB have any estimates of the impact of Federal rules and paperwork imposed on State and local governments by the following agencies: EPA and Health and Human Services; specifically within EPA, the Office of Water; and specifically in Health and Human Services for CMS, which was formerly HCFA. And, the question really delves into wouldn't such data help in analyzing the opportunities for either prioritization of efforts within those agencies or the sunsetting, if you will, of such rules that perhaps their time has passed, so to speak? Dr. Graham. Just briefly, we have information on any of the major rules that were enacted by those agencies; however, the summary tables that are in the report only address those programs for which there were three or more major rules. If there were less than three, we said as an admittedly arbitrary cut point, we didn't think it was necessarily fair to represent that agency's performance based upon a sample of two or one. Now, I want to get back to your earlier point, because we have some indirect evidence on whether old regulations are really a major concern of the public. Mr. Ose. All right. Dr. Graham. This document was generated when 1,700 Americans responded to the President's personal request--as well as our Federal Register notice--for nomination of specific regulations and paperwork requirements and guidance documents that they felt did not have benefits that justified their costs or that could have stronger benefits if they were amended. It's interesting, when you look through these 316, only a very small fraction of them are older rules or guidance documents. A very strong fraction of them are those that have been enacted within the last 10 years, and, in most cases the commenters are not asking for these to be repealed, and that makes sense when you look at some of our cost-benefit information which says a lot of these rules are pretty sensible. They do have benefits that seem to outweigh their costs. What commenters are looking for is modifications of these rules to make them more practical, more feasible, or to have less cost for the same benefit. And, I think it's very important for the focus of this subcommittee's effort to see that the agenda here is to make the regulatory system smarter and to incrementally reduce the cost while maintaining the benefits or increase benefits while maintaining the costs. There is no demand that we're aware of for wholesale elimination of specific older regulatory programs. Mr. Ose. The gentleman from South Dakota. Mr. Janklow. Thank you, Mr. Chairman. Sir, could you tell me, the comment period is open until April 3rd. At this point how many comments have you received; do you know? Dr. Graham. I don't know, but quite frankly, what we find, our experience is that people use that full comment period, and most of our comments come in toward the end of that period. Mr. Janklow. It's like a term paper? You get it done---- Dr. Graham. Sort of like us trying to get our report done for release with the Federal budget. It's got the same spirit to it. Mr. Janklow. And, I notice, sir, also on page 6 of your documentation, you talk about the concern of the administration--the rightful concern the administration has on unfunded mandates. Have you ever undertaken an analysis as to the unfunded mandates that are shifted onto State and local governments and what the real fiscal impact is nationwide? Now, that is something, I think, that can be done with real definity, if I can use the word that way, because State and local governments know what they spend on an annual basis to fulfill mandated programs, and so taking their percentage share of it would be relatively easy. Has anybody ever done that, I mean, areas with respect to the Clean Water Act, this whole TMDL set of rules that they have with EPA? States, governments, local governments have spent huge quantities of money complying to find out that the National Academy of Sciences in a report issued a little over a year ago said that is not the best science to utilize with respect to the streams and the creeks and the rivers in the country. And, so has anybody ever looked at that particular issue, unfunded mandates' cost to State and local governments? Dr. Graham. You're raising, I think, an excellent question, and I have to say I'm not fully satisfied with where we are at OMB in our current ability to quantify all of those unfunded mandates and attribute them to specific agencies and to specific agency programs. In the final report last year, which we released, we do describe in some detail qualitatively all of the rules--major rules that we were able to identify that did involve an unfunded mandate, and we also looked closely at how well agencies are doing their job of consulting with Governors and mayors before they engage in this practice of an unfunded mandate. But, I think that it's fair to say, we have a lot more work to do in that area, and it's something that I think that encouragement from you would only be helpful, sir. Mr. Janklow. What about the area of mandates on the Federal Government? Have you ever looked at that? I mean, certain studies and analyses, regulatory fulfillment that the Federal Government does with respect to itself, have you ever looked-- are those costs reflected in the costs that you've set forward in your reports? Dr. Graham. If those regulations--even if they are affecting the Federal Government itself, if they are a major regulation as defined in the discussion we had earlier with the chairman, they should be included in that report. But, budgetary costs per se, as I mentioned, would typically be analyzed and dealt with predominantly on the budget side of OMB. Mr. Janklow. But, if that happens, we'll never know the real cost. Dr. Graham. Because you're saying it's not--it is included in the budget--in the appropriation as part of the budget process---- Mr. Janklow. Right, but it's hidden--there you can't find it. I mean, it's not on an item, it's not on a line. Dr. Graham. Well, I think it would be an excellent idea to have a more specific accounting within agencies of both how much the agencies are spending on rulemaking activities themselves and how much in Federal budgetary dollars are induced by that. Mr. Janklow. I'm familiar--for example, on the Missouri River with the Army Corps of Engineers, they've been working about 16 or 17 years on rewriting a master manual that should have been done 15 years ago. I believe they spent--at this point they reported over $23 million, and they're not done. That's in compliance with requirements that they have in the way they carry out their mission. There just has to be a better way. If we're smart enough to screw it up that badly, we ought to be smart enough to figure out how to straighten it out. We don't even take incremental steps to straighten it out, but we just have people like me that complain about it. The net result is nothing is being done, but money is being spent. What does it take to fix problems like this? In your estimation, sir, what does it take to fix--I mean, obviously we've reached the point of almost gridlock in America with respect to every major issue. What's it going to take to fix these little areas? Maybe if we fix the little stuff, we can head to the big stuff later. Dr. Graham. Well, I think--I don't know the answer to your question, and I don't know the specifics, quite frankly, of the example that you're referring to with the Army Corps of Engineers. And, I'd like to learn more about it, because we are in dialog with all the agencies, including the Corps, about specific steps that we can take at OMB to insist upon a more efficient and deliberative process. We agree with the observations that oftentimes this process of developing analyses and doing rulemakings is often too slow, and we need to work on making the rulemaking process itself more efficient, less costly, more timely, at the same time that it's competent and open to the public. Mr. Janklow. Can you do what you just said within the framework of the existing authority? Mr. Ose. Your time is expired. We'll go around and come back. I want to note that we have been joined by the gentleman from Tennessee Mr. Cooper, who has requested either a couple minutes to gather himself or would like to proceed. Mr. Cooper. I think I'm ready. Mr. Ose. OK. The gentleman is recognized for 5 minutes. Mr. Cooper. I'm interested, Mr. Chairman, in actuarial assumptions leading to valuation of human life. It's my impression that EPA, OIRA differ, in that OIRA assumes that everybody who dies prematurely only had 5 more years to live, is that correct; whereas, EPA prefers an estimate that assumes that everyone has 15 more years to live. Is that correct, or am I being given bad information? Dr. Graham. I don't think it's accurate, sir. I don't think it's accurate. I think that you're referring to the way in which EPA is developing their benefit estimates for reducing the human health harm from exposure to air pollution. What EPA has done is they have presented one set of estimates that uses what's called the lives-saved approach, and then they presented an alternative set of estimates that used the life-year-saved approach. And, I believe the 5-year number that you're referring to is correct with respect to the life-year-saved approach. I'm not aware that they have estimated a number of life-year-saved for the lives-saved approach, because by its inherent nature, it measures the benefits in terms of number of lives saved. Mr. Cooper. What is the best study or comparison that would compare those two approaches so that the average Member of Congress could understand that? Dr. Graham. Boy, that is a great question. Mr. Cooper. It may be impossible to---- Dr. Graham. I'll recogitate on that, but I'll send you a few things. Mr. Cooper. That would be helpful. Dr. Graham. Yes. [The information referred to follows:] [GRAPHIC] [TIFF OMITTED] T6439.012 [GRAPHIC] [TIFF OMITTED] T6439.013 [GRAPHIC] [TIFF OMITTED] T6439.014 [GRAPHIC] [TIFF OMITTED] T6439.015 [GRAPHIC] [TIFF OMITTED] T6439.016 [GRAPHIC] [TIFF OMITTED] T6439.017 [GRAPHIC] [TIFF OMITTED] T6439.018 [GRAPHIC] [TIFF OMITTED] T6439.019 [GRAPHIC] [TIFF OMITTED] T6439.020 [GRAPHIC] [TIFF OMITTED] T6439.021 Mr. Cooper. It's my understanding that OIRA was heavily involved in developing the benefits analyses for the administration's Clear Skies proposal. Dr. Graham. Correct. Mr. Cooper. And, I assume if you worked on the benefits, you also worked on the costs, or just the benefits? Dr. Graham. Both. Mr. Cooper. I have been told that the assumptions underlying the modeling for that assume that it's less important to save the lives of elderly people because they have less long to live than it would be to save the lives of young people. Is that a fair characterization of what was done? Dr. Graham. No. I don't think so. Actually, if you look closely at the benefit estimates that are in what I refer to as the alternative estimate in my answer to the previous question, the life-year-saved approach, they assume that each year of life after age 70 is valued at $250,000 of savings, a rather substantial investment. And, for each year of life saved for those under age 70, it's at roughly $163,000. So once you're in the life-year-saved approach, you face the difficult and sensitive issue of how do you value each of those years of life within the life span, and that is the approach that EPA used in the alternative estimate. Mr. Cooper. Perhaps I need to review that document that I was requesting earlier, but it's my impression that the administration's Clear Skies proposal assumes that lives of people who are younger than 70 years of age are worth about $3.7 million each, whereas lives over age 70 are worth considerably less. Dr. Graham. Actually, the administration's Clear Skies proposal presented two sets of estimates. One assumed that all lives saved are equally valuable at roughly $6 or $7 million per life saved, and then the alternative estimate used the life-year approach, and it assumed that, for senior citizens, because they have relatively few life years remaining, that the valuation of each of their remaining life years is greater than for those younger than age 70. Mr. Cooper. I thank you. I have no more questions, Mr. Chairman. Thank you. Mr. Ose. I thank the gentleman. I want to go back to something that Governor Janklow brought up, if I could, Dr. Graham. He was asking about whether or not any consultation has been done between State and local interest groups or the National Governors Association. I was unclear on the answer relative to the impact on Federal rules and the paperwork imposed on State and local and tribal governments. So, the question directly is, has any contact been made with State or local governments or tribal groups regarding the impact of Federal rules and paperwork imposed on them? Dr. Graham. Our final report, our 2002 report, describes for a variety of the agencies the activities of consultation that are being undertaken, and I don't have the specific groups at my fingertips right now, but there is a substantial amount of consultation described in that report. Mr. Ose. Is that by regulation or by agency or both? Dr. Graham. I think it's done by regulation. They describe a variety of different regulations and what the different approaches are to consulting State and local officials. Is it the Governor's office? Is it the State agency? Is it the legislature and so forth? Mr. Ose. OK. And--but there hasn't been any--again, those are individual rules. It hasn't been an agency kind of approach, if you will? You have to take the individual rules and aggregate them to get the agency information? Dr. Graham. Right. And quite frankly, there's variability within agencies on how well they exercise that responsibility. I would be reluctant to generalize across a whole agency. Mr. Ose. We go back to that--about the quality of the information--or the assumptions underlying the conclusions. The next question I have has to do with the manner in which this information is delivered. This year the accounting statement with great appreciation came out at the same time as the President's budget. It came out in the Federal Register. What is the likelihood of pairing it with the President's budget? Is there any positive or negative to be gained by putting the other accounting statement with the President's budget, or is there something to be gained by leaving it separate? I'm curious about that particular question. Dr. Graham. I think it's a good question, and I think, quite frankly, the utility of that to Members of Congress and the appropriators is something that I think we would be interested in their judgment on that question. The one cautionary remark I would make is, we have released our draft report in the Federal Register at the same time as the budget. It is not our final report. It has not been peer reviewed. It has not been subject to public comment. And, consequently, we would be a little reluctant to put a document like that in the budget documents themselves. Mr. Ose. Because of its draft nature? Dr. Graham. Yes. Now, the statute requires that we get peer review, public comment and interagency review before we go final, and, if you back up to allow the appropriate time for that activity, as a practical matter, we would probably have to trail a year to put this in the Federal budget documents. Mr. Ose. I don't want to go that way. Dr. Graham. So, I think that there are some practical problems with that idea. Mr. Ose. All right. I appreciate the feedback. The other thing you've been struggling with, which I just find amazing, and Governor Janklow brought this up earlier, is that when the agencies submit to you their information, sometimes it comes in with what I'm going to call a hodgepodge of standards and timeframes and what have you. Do you support or do you not support a requirement that this regulatory accounting statement use the same 7-year timeframe from agency to agency to agency? Dr. Graham. The 7-year timeframe, as I understand it, comes from the tradition on the budget side of how they present information, and that is not currently the way in which we develop and present information for regulatory costs and benefits. For example, if you were to put a new piece of pollution control equipment on a heavy diesel-powered truck, we would estimate the costs and benefits over the expected lifetime of the truck. OK? And, we would not want to cut that off after 7 years, and not count the operating costs that are higher after 7 years or the benefits that are gained after 7 years. Now, one possibility would be to somehow collapse all that information into the 7-year period, but then you have an arbitrary allocation of that to the 7 years. Mr. Ose. Or you end up discounting the future value of it. Dr. Graham. What we do currently is we discount all of those future costs and benefits to their present value, but we express those as an annualized value, like a mortgage payment, over that horizon of the investment. So, it's not clear to us how this 7-year exercise would be accomplished in this case, but we're open to a suggestion on whether that would really be useful. Mr. Ose. I want to come back to this, but my time is expired. The gentleman from South Dakota. Mr. Janklow. Thank you very much, Mr. Chairman. Dr. Graham, OMB currently uses what they call an information collection budget; is that correct? Dr. Graham. Yes, sir. Mr. Janklow. And, managing the paperwork that needs to get done, do you support a pilot test to do regulatory budgeting to see if this would help OMB and the other agencies rank their risks and establish the priorities, make the choices they have to make? Dr. Graham. Well, let me start with the premise of the question. While we do have what's called an information collection budget, it is not one where either we or Congress imposes on each agency a limited amount of paperwork that they're allowed to do, and then they can choose which paperwork burdens to impose and which not to impose. We review each paperwork burden request based upon its rationale, without any cap on the total amount. Congress has not imposed a cap. We at OMB don't feel we have the authority to impose that cap. We do have the responsibility to review each request on its own merits. But having admittedly quibbled with the premise of your question a little bit, I want to get to the heart of the question, which is would it be a good idea to do a pilot project of some form to experiment with the idea of the regulatory budget? And I do think that there would be some significant advantages to such a pilot. Mr. Janklow. Do you have the legal authority to do that now? Dr. Graham. I'd have to confer with counsel on that subject, as I'm not certain about it. But, the point I would like to make is that I think that, in order to give the concept of a regulatory budget a fair experiment that is going to give a good indication of what it would actually be like if it were done more substantially, I think it should be done on a very modest basis, probably within a particular agency, and one where we think we have readily available information to operationalize the comparison of risks, the number of lives saved and different programs and so forth. Something like the National Highway Traffic Safety Administration might be an example of that, with responsibility for the safety of the highways, the safety of automobiles and so forth. Mr. Janklow. Sir, absent that, is there a better way to do it than we're doing it? In your opinion, is there a better way to do it than we're doing it? Dr. Graham. Well, I think we have a lot of work we can do better at analyzing the specific regulatory packages that are submitted to it. We don't for a minute want to suggest that we're doing all we can at the present time. We realize we have to work harder at what we're doing. Mr. Janklow. How do we fix that? How do we get you to work harder? Dr. Graham. Well, I think that these hearings are helpful. As evidenced today, what happened this year compared to last year is clear evidence that we do try to be responsive to what the subcommittee feels is critical, and we definitely work in that direction. But I think, in reaction to your question, I think that it is a constructive idea. We would have to sit down and work out the operational details of how such a pilot might be launched, whether it requires legislation, whether it doesn't require legislation. But we're open to that. We think that's a constructive idea. Mr. Janklow. Thank you. Thank you, Mr. Chairman. Mr. Ose. The gentleman from Tennessee. Mr. Cooper. Thank you, Mr. Chairman. I'd like to return to the value of human life question. It's my impression from reading the newspaper that the government's smallpox inoculation program has adopted procedures from an old Policeman's Compensation Act that values a life at about $260,000 each. You know, say you died as a result of having the inoculation. The government's liability would be limited to that amount. There are other examples of government attempts to value human life, and you might turn toward an environmental regulation that said you had to clean up all the dirt in the brownfields and spend hundreds of millions of dollars doing it so that, if you ate the dirt, you wouldn't get sick, and you could impute a value, many millions of dollars, to a human life saved in that instance. Is there any study that you're aware of that looks across government agencies to see how different agencies treat the value of human life? For example, the compensation fund in New York City for victims of September 11th. The administrator of that fund is trying to figure out how much to pay each beneficiary for their family, and part of that calculation is their earnings potential over an estimated future life span, and that calculation, you know, varies widely between individuals. Janitors get paid less than investment bankers. Are you aware of any consistent effort for the government to look at these different valuations or approaches, because it's human beings involved in every case? Dr. Graham. It's something that we're concerned about at OMB, that different agencies--when they do cost-benefit analysis or even when they do compensation programs of various sorts--have differences in what types of numbers they're using, and we're not always fully clear on what the rationale is for why the numbers are different in one agency than they are in another agency. One of the reasons we're encouraging the public and academic experts and others to participate in the process of OMB's new regulatory analysis guidelines is because that issue is on the table, whether there should be some consistency across agencies or whether we should be allowing agencies to do different things in different situations. So, now is a time for that comment, because those guidelines are now open. Mr. Cooper. How long will the comment period last? Dr. Graham. I think it runs--is it early April, I believe Mr. Chairman noted at the beginning of the hearing. Mr. Cooper. I think there's a professor at Harvard Law School who is quite an outspoken researcher in this area, and it's a very controversial area. He's been denounced when he makes public appearances for even raising the topic. But, I don't know if he submitted a comment yet. I may--at least one of the experts that I'm aware of in the field as we try to go through this thing. I take it you didn't meet him while you were at Harvard? Dr. Graham. Is this Professor Viscusi? Mr. Cooper. Yes. Dr. Graham. Yes. We are expecting comments, and we are in communication with him. Mr. Cooper. Well, I hope he will weigh in with the debate. I thank the Chair. Mr. Ose. I thank the gentleman. Dr. Graham, the purpose of this when we set out was to try and find a way whereby Congress took an active role each year in how the regulatory burden that is placed on the American public by virtue of our actions gets allocated. Is it too high? Is it too low? Is it just right? Where do we want more, where do we want less and what have you? Now, that leads me to ask, as I did with Dr. Miller in an op-ed last year, whether or not it's appropriate to develop a--what I refer to as a regulatory appropriations process. Now, that would necessarily mean that we quantify the burden, we quantify the benefit, we quantify the cost, and then to make a decision, a conscious decision as we do in the fiscal appropriations process, as to whether or not we want to place this burden in exchange for the benefit on the American public. And, it would mirror, if you will, the appropriations process for a fiscal side almost exactly. What is your view of the utility of such a regulatory appropriations process? Dr. Graham. I can only start by saying that I think the question you just asked is closely related to the question about the pilot project on the idea of a regulatory appropriation or a regulatory budget. I guess my starting point would be, while there is some good conceptual writing in the literature on the merits of this idea, and there are people on the panel who will follow me who know these issues certainly better than I do, my instincts are that we should lead with pilot project development of experience rather than jumping directly in. And, there are some concerns about that kind of idea that we need to get addressed. For example, we feel strongly that not only the costs of regulation should be considered, but the benefits of regulation should be considered, and how exactly that would emerge in this process of a regulatory appropriation. And, we understand on the budget side that they look primarily at the budgetary allocation, but maybe they don't always look as carefully as they need to at certain types of benefit issues. So, it's something we're very sensitive to and think it's important to keep track of. So, I guess you'd say in a cautionary way we're optimistic about the idea, but we'd like to proceed incrementally. Mr. Ose. I think that's what brings home to me the importance of the work that you do. When you interact with the different agencies and the like, asking them to, in effect, measure their costs and benefits of this and that program and submit them for a regulatory accounting purpose, it then will allow those of us who have the duty, if you will, to allocate resources and make decisions to prioritize A, B, C, if we can save 100 lives here or we can save--or remove 35 tons of carbon monoxide there and so forth and so on. The question I have is then--kind of to pile on--is a little bit broader in the sense that are you making progress with the different agencies in terms of standardizing the format under which they report to you so that apples are apples and oranges are oranges, and that the decisionmakers' use of this information leads to, frankly, good decisions? So my question is, is that happening? Are we making progress? Dr. Graham. Well, I'm sure we could do better, but the guidelines which are now open for comment are the instrument by which OMB lays out its expectations for what agencies will supply to us in the analytic process. But, just to support the general premise and line of thinking that is behind your question, we're hearing a lot in the news today about concerns about the safety of sport utility vehicles, of light trucks and so forth. It would be useful to know how many lives could be saved through different approaches through improving the safety of sport utility vehicles. Some of these ideas are very expensive, but some are very basic things like people should wear safety belts, we should enforce safety belt laws. It turns out 70 to 80 percent of the people killed in SUV rollover crashes were not wearing safety belts. So, before we get into very grandiose schemes for how we're going to address that problem, it would be useful, I think, to look at the more basic and straightforward approaches. Mr. Ose. My time has expired. The gentleman from South Dakota. The gentleman has no further questions. The gentleman from Tennessee. Mr. Cooper. I have no further questions, Mr. Chairman. Mr. Ose. The gentleman has no further questions. I want to thank you for coming. We are going to leave the record open in the event there are written submittals and we appreciate your timely response to them. That will be for a period of 10 days from today. As always, it's great to have you come visit with us to see us making marked progress, in other words, measurable progress forward in correlating the benefits with the costs of regulation. These standards that we're going to use that are out for comment right now, I think this is at the heart of our next leap forward, and I encourage your pursuit of that. I appreciate your coming. Dr. Graham. Thank you, Mr. Chairman. Mr. Ose. We're going to take a 5-minute recess to allow the second panel to come forward. [Recess.] Mr. Ose. We're going to reconvene. This is the second panel of today's hearing. As we reviewed in the first panel, first I want to welcome the witnesses today for joining us. We appreciate your taking the time to come down and testify. There are five of you. Each of you have submitted significant statements. Those statements, I mean, I've read them. Trust me, I've read them. The staff has read them. We have had the opportunity to review them. We appreciate your submitting them. However, given the length of some of them, we're going to constrain your summaries of them to 5 minutes each, and we'll just move from my left to right as it relates to that. Then we'll go to questions from Members. Now, as indicated in the earlier panel, we routinely swear in our witnesses here. So if all five would rise. [Witnesses sworn.] Mr. Ose. Let the record show that the witnesses answered in the affirmative. Today on the second panel are Dr. James C. Miller III, who is the former Director of OMB and now with CapAnalysis group. Dr. Robert Hahn who is the director of the AEI-Brookings Joint Center for Regulatory Studies. Dr. Jim Tozzi who is a former Deputy Administrator for the OIRA over at OMB and an advisory board member for the Center for Regulatory Effectiveness. We have Lisa Heinzerling--am I saying that correctly? Ms. Heinzerling. Yes. Mr. Ose. OK. Who is a professor of law at Georgetown and Rabbi Daniel J. Swartz who is the executive director at Children's Environmental Health Network. Thank you all for coming. Dr. Miller, you are going to be first for 5 minutes. STATEMENTS OF JAMES C. MILLER III, FORMER DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET, CHAIRMAN, CAPANALYSIS GROUP; ROBERT HAHN, DIRECTOR, AEI-BROOKINGS JOINT CENTER FOR REGULATORY STUDIES; JIM TOZZI, FORMER DEPUTY ADMINISTRATOR, OFFICE OF INFORMATION AND REGULATORY AFFAIRS, OFFICE OF MANAGEMENT AND BUDGET, ADVISORY BOARD MEMBER, CENTER FOR REGULATORY EFFECTIVENESS; LISA HEINZERLING, PROFESSOR OF LAW, GEORGETOWN UNIVERSITY LAW CENTER; AND RABBI DANIEL J. SWARTZ, EXECUTIVE DIRECTOR, CHILDREN'S ENVIRONMENTAL HEALTH NETWORK Dr. Miller. Thank you, Mr. Chairman. I have the report and thank you for admitting that into the record. [Note.--The information can be found at www.omb.gov and is on file with the subcommittee.] Dr. Miller. I'll try to be very brief. I will make the point that the OMB report this year is of better quality than last year. There are some deficiencies. It's a draft report rather than a final report. There are a lot of inconsistencies in the data that are presented. By and large, though, I make the same point I made last year. This I think is attributable to the agencies not responding with the template that OMB has requested. OMB might be more aggressive in insisting on the agencies providing the information in a consistent fashion, and perhaps that will be the case next year. Technically, I think the work is quite good. The draft guidelines incorporate some of the best, I think, very high-quality standards. I think that's very important. Second, the vast majority of the information that reaches OMB for this report comes from the agencies. Now, I know the agencies realize that there are biases in the information they receive. People who advocate regulations tend to overstate the benefits. People who oppose regulations tend to overstate the costs. But, by and large, the raison d'etre of the agencies is to issue regulations. So, if there is a bias, I think the bias is that they tend to overstate benefits and understate costs. Third, independent agencies don't report their information under the Executive orders. I remember very vividly talking with then-Vice President George Herbert Walker Bush about this, and he made the decision not to extend President Reagan's Executive Order 12291 to the so-called independent agencies. I would urge you to consider extending this requirement and the requirements of regulatory reporting statutes to the so- called independent agencies. Few of them really do the benefit- cost analysis to support the rules and those that do tend to fall short, in my judgment, of the kind of standard that OMB outlines in its guidelines. Fourth, there are a lot of cases where regulatory agencies are explicitly forbidden to follow the kind of analysis that we all are looking for. That is to say, sometimes Congress says no matter what the cost, you must do it this way. Sometimes it says you must follow some kind of engineering standards rather than performance standards. These really raise cost--or in the alternative, with the same costs you could realize substantially greater benefits. I really urge you to have OMB do a study of this or to initiate a study some other way in order to find out the nature of this. Finally, even if the OMB report were perfect, you still don't have a process for evaluating regulations, applying restraints on costs, and prioritizing. OMB does a good job, I think, but they can only go so far, and I really think Congress should have a regulatory appropriations process--the idea we-- Mr. Chairman, you and I--wrote about last year. So I urge you to talk with your colleagues about that. I urge you and your colleagues to urge the agencies to respond to OMB more completely and in a more expeditious manner, and a more complete manner, and in a manner that's more consistent across agencies and regulations. And, by the way, I want to respond to your question. I think OMB should issue this report, a final version, at the same time the budget comes out. It ought to be a regulatory budget. Twenty years ago, when I was OIRA Director and Jim Tozzi was Deputy Director of OIRA, we talked about having a regulatory budget. We didn't get it done, but surely somebody can get it done, and if you put the pressure on OMB and the agencies, I think you can do it. I think you would have a much better handle on total regulation. The administration can do it on its own if it wants to take the initiative, and I would encourage you and encourage other people in the administration, such as John Snow, the Secretary of Treasury to work with on this. Snow is an economist, very well-trained, thoughtful guy, and he could lead an effort in this regard. Thank you, Mr. Chairman. Mr. Ose. Thank you, Dr. Miller. [The prepared statement of Dr. Miller follows:] [GRAPHIC] [TIFF OMITTED] T6439.022 [GRAPHIC] [TIFF OMITTED] T6439.023 [GRAPHIC] [TIFF OMITTED] T6439.024 [GRAPHIC] [TIFF OMITTED] T6439.025 [GRAPHIC] [TIFF OMITTED] T6439.026 Mr. Ose. Dr. Hahn for 5 minutes. Dr. Hahn. Thank you, Mr. Chairman. My testimony was jointly written with Dr. Robert Litan of the Brookings Institution, and we ask that the written remarks be submitted into the record. Mr. Ose. Without objection. Dr. Hahn. Coming to testify here is an honor, but it reminds me a little bit of what Yogi Berra said some time ago that this feels like deja vu all over again. I've been studying regulation and the cost and benefits of regulation for over a quarter of a century now. My sense is that the debates over regulatory policy have often been highly partisan and ill- informed, and I think that it's important to look for mechanisms to try to depoliticize the process. Too often, legislators and agencies find it in their interest to highlight the benefits of regulation without also noting the costs. We believe it's important to highlight both and that the public has a right to know how and why regulations are implemented. One of the things that economists generally agree on is that there is significant waste in the current regulatory system. This work is supported by the AEI-Brookings Joint Center, including a recent analysis of the rule on corporate average fuel economy, which is not found to pass a benefit-cost test. And, in addition, Dr. Graham has also done some work when he was at Harvard that suggests we could get a lot more bang for our regulatory buck. In the testimony that you have, we offer 10 recommendations, 5 directed at OMB and 5 directed at Congress for improving regulatory accountability and transparency. I want to focus on three of them right now. The first, and Dr. Miller touched on this, is that we think it's really important in the analysis that's done for regulations to put a good summary in front of it. So someone like you, who is very busy, can look at it very quickly and see what the agency says about costs, benefits, and whether this regulation passes a benefit-cost test? So, we argue very strongly for a template, a kind of standardized summary table that would give you a very good idea of what's contained in that 300 or 400-page document. Second, we believe that OMB should publish available estimates on the cost and benefits of regulations from independent agencies; but we also, in line with the recommendation made by Dr. Miller, would go further and request that independent agencies provide annual assessments of the costs and benefits of each of their major regulations. Why do I say that? Well, if you read the newspaper, you probably are aware of the fact that the FCC had a fairly controversial decision recently about the extent to which the regional Bell operating companies should be regulated, the extent to which they should share their broadband services and the local loop. I think that having the FCC do an analysis of that multi-million, if not billion, dollar issue would be good in terms of helping the commissioners make a reasonable decision and good in terms of making the process more transparent. Finally, I'd like to suggest that Congress should create a congressional office of regulatory analysis, or at least a separate agency outside of the executive branch, to independently assess important regulatory activity occurring at all Federal regulatory agencies. I can see that I'm running out of time; so I'm not going to make a lengthy case for this, but I merely want to note that there was an opportunity to do this in the 106th Congress. It would have cost $500 million for a pilot project that would have resided at GAO. My colleague and I thought that was an incredible bargain given the upside potential associated with this investment. One of the problems that OIRA has is that it can't always be honest about what it thinks politically because it has to tow the administration line. This agency could do that. Let me conclude, because I see that I'm out of time. Thank you. Mr. Ose. Thank you Dr. Hahn. [The prepared statement of Dr. Hahn follows:] [GRAPHIC] [TIFF OMITTED] T6439.027 [GRAPHIC] [TIFF OMITTED] T6439.028 [GRAPHIC] [TIFF OMITTED] T6439.029 [GRAPHIC] [TIFF OMITTED] T6439.030 [GRAPHIC] [TIFF OMITTED] T6439.031 [GRAPHIC] [TIFF OMITTED] T6439.032 [GRAPHIC] [TIFF OMITTED] T6439.033 [GRAPHIC] [TIFF OMITTED] T6439.034 [GRAPHIC] [TIFF OMITTED] T6439.035 [GRAPHIC] [TIFF OMITTED] T6439.036 [GRAPHIC] [TIFF OMITTED] T6439.037 [GRAPHIC] [TIFF OMITTED] T6439.038 [GRAPHIC] [TIFF OMITTED] T6439.039 [GRAPHIC] [TIFF OMITTED] T6439.040 [GRAPHIC] [TIFF OMITTED] T6439.041 [GRAPHIC] [TIFF OMITTED] T6439.042 [GRAPHIC] [TIFF OMITTED] T6439.043 [GRAPHIC] [TIFF OMITTED] T6439.044 [GRAPHIC] [TIFF OMITTED] T6439.045 [GRAPHIC] [TIFF OMITTED] T6439.046 Mr. Ose. Dr. Jim Tozzi for 5 minutes. Dr. Tozzi. Thank you, Mr. Chairman and distinguished members of the committee. I'm very pleased to appear here today, first of all, because of the leadership this committee has given historically to OMB's regulatory office. Without this committee and its movement under the Paperwork Act, there would not be any regulatory office at OMB, and the more things change in Washington, the more they stay the same because I still see Congressman Brooks looking down at me after 35 years. I'm here to speak on a very specific issue, and the issue is on a regulatory budget. Notwithstanding my pleasant personality, I was asked because of only one thing. I developed the first regulatory budget when I was the Assistant Director of OMB, and I was appointed by President Carter at that time, and we developed a regulatory budget for EPA. The numbers, the facts and data are here. It's been given to your committee's staff, and it's also on the Center's Web site. I think it's real numbers, real regs, real process, and it's there. Mr. Ose. Would you like us to make it a part of the record? Dr. Tozzi. Yes, sir please. Mr. Ose. Without objection. [Note.--The information can be found at www.thecre.com and is on file with the subcommittee.] Dr. Tozzi. Now, we could go over all the details of that but I don't think this is the right time. Basically, when we looked at the regulatory budget, one of the important things that we had to do was get adequate cost information, and so being younger and more, what would you call, idealistic, we drafted a Regulatory Cost Accounting Act of 1980. I would like that introduced in the record if the Chair---- Mr. Ose. Without objection. Dr. Tozzi. And, a section-by-section analysis of the regulatory cost accounting---- Mr. Ose. Hearing no objection, that will be done. [The information referred to follows:] [GRAPHIC] [TIFF OMITTED] T6439.047 [GRAPHIC] [TIFF OMITTED] T6439.048 [GRAPHIC] [TIFF OMITTED] T6439.049 [GRAPHIC] [TIFF OMITTED] T6439.050 [GRAPHIC] [TIFF OMITTED] T6439.051 [GRAPHIC] [TIFF OMITTED] T6439.052 [GRAPHIC] [TIFF OMITTED] T6439.053 [GRAPHIC] [TIFF OMITTED] T6439.054 [GRAPHIC] [TIFF OMITTED] T6439.055 [GRAPHIC] [TIFF OMITTED] T6439.056 [GRAPHIC] [TIFF OMITTED] T6439.057 [GRAPHIC] [TIFF OMITTED] T6439.058 Dr. Tozzi. And, Mr. Chairman, as most Tozzi-proposed legislation, it didn't get out of the administration, but in any event, it was subjected to interagency review and it set up a regulatory cost accounting system governmentwide. I must say, it was opposed across the board by virtually all agencies, including some of my colleagues at OMB; so it was not a winner. But, where are we now? I'll get to the bottom line. We could say there's a lot of problems with the concept of regulatory budget, but by and large, we still don't have a way, even if we look at individual regs, of looking at their total cost to society and they're--I would suggest Dr. Miller's and Dr. Hahn's and Dr. Graham's and any other doctors who testified, view on the fact that's the right way to go. But let me say that there's one thing, before we invent a new wheel, we have a regulatory budget right now without numbers, and it's this thing called the Unified Agenda of Federal Regulations. It comes out every 6 months. Your committee was the leadership in requiring all the agencies to do it. It has every major regulation issued by the government, and, if you want to start the work on a pilot study, I would look at converting this document into a regulatory budget. President Reagan signed Executive Order No. 12498 that took the first steps toward a regulatory budget where OMB reviewed all the regs before they went out and debated them with the agencies. Many of these regs are costed out, so all you have to do is start putting numbers on it and develop some algorithms. Finally, in terms of regulations, if Dr. Hahn would yield 1 minute of his time that he didn't use, I have two recommendations. The first recommendation is---- Mr. Ose. Dr. Tozzi, Dr. Hahn used all of his time, so I'm sorry---- Dr. Tozzi. Oh, I'm sorry. Mr. Chairman, I notice your mathematical ability and I will never question it again. I have 60--68 seconds. What I would recommend is two things. When I was at OMB we had 100 staff. They're down to 50. So if you're going to lay any new requirement, I know this committee's not in favor of unfunded mandates, and so, if you lay this requirement on them, it's an unfunded mandate without increasing their staffing. Second, if you're going to move toward a regulatory budget, I would make a rebutable presumption in favor of moving this document into a regulatory budget before I started a brand new reporting system. Thank you. Mr. Ose. Thank you, Dr. Tozzi. [The prepared statement of Dr. Tozzi follows:] [GRAPHIC] [TIFF OMITTED] T6439.059 [GRAPHIC] [TIFF OMITTED] T6439.060 [GRAPHIC] [TIFF OMITTED] T6439.061 [GRAPHIC] [TIFF OMITTED] T6439.062 [GRAPHIC] [TIFF OMITTED] T6439.063 [GRAPHIC] [TIFF OMITTED] T6439.064 Mr. Ose. Ms. Heinzerling, you are recognized for 5 minutes. Ms. Heinzerling. Thank you. I have four points I'd like to make today. First, OMB's demand that agency rules pass OMB's test of cost-benefit analysis violates many existing laws. Second, if the assumptions embodied in OMB's current style of cost-benefit analysis were put to a vote in Congress, I believe they would fail. Third, as Dr. Graham indicated this afternoon, clean air regulation represents one of the best regulatory bargains around, even according to the strict terms of cost benefit analysis. Yet, OMB has mysteriously singled out this kind of regulation for particularly penetrating scrutiny, and even for deregulatory action. Fourth, OMB's intention expressed in this draft report and in interviews recounted in an article in the New York Times this morning, to subject even more of the values we hold dear, including privacy and freedom itself, to cost-benefit analysis is a project doomed to failure, and it is one that flouts our country's founding commitment to adhere to certain basic principles regardless of the monetary tradeoffs that might be involved in adhering to them. This commitment is indeed a basic premise of the Bill of Rights itself. First, most Federal laws do not require, and many do not even allow agencies to use OMB-style cost-benefit analysis in developing regulatory policy. In its new guidelines for cost- benefit analysis, however, OMB appears to encourage, or even to require, agencies to circumvent statutory directives when they conflict with OMB's cost-benefit agenda. These guidelines effectively put OMB rather than Congress in charge of defining the scope of agency authority. This is not OMB's role under the law. Second, the assumptions embodied in OMB's current style of cost-benefit analysis would not, I believe, be enacted into law if they were put to a vote in this body. I limit myself to one example. In recent cost-benefit analyses, as discussed already this afternoon, OMB has estimated the value of life based on an assumption that the elderly are worth less than younger people. They start with an assumption that the elderly are worth $2.3 million and younger people are worth $3.7 million. Is it unreasonable to believe this assumption would fail to be enacted into law if considered by this body? I think not. Third, the positive cost-benefit profile of clean air regulations should make it the darling of today's OMB. That it is not, that it has been subject to deregulatory activity, and to especially heightened scrutiny without the corresponding cost-benefit analysis that is applied to regulatory actions, reveals, in my opinion, the political bias that lies at the heart of OMB's oversight activities. Fourth, and finally, in an administration in which life, health, and the environment all have been given a price, albeit a heavily discounted one, I suppose it should not surprise us that it is now proposed that privacy and freedom itself also be given a dollar value. The explanation, as I understand it, is that, if privacy and freedom are not stated in monetary terms, if they are not given a price, then they will not count for anything when they are threatened. It seems to me just the opposite is the case. Once we say that privacy and freedom have a precise and finite monetary price, once we allow them to be traded away for money, then we have cheapened these values deeply and perhaps irremediably. Thank you. Mr. Ose. Thank you, Ms. Heinzerling. 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I'm grateful for your interest in this issue and the opportunity to share our ideas with you. The Children's Environmental Health Network is a nonpartisan multidisciplinary national organization whose mission is to protect children from the environmental health hazards they face in the womb and during their growing years. First, some context for our concerns. How are children different? Because of normal childhood behaviors in the natural course of human development, children are often at greater risk from environmental contaminants. They eat, breathe and drink more than adults, taking in greater exposures per pound that may affect their rapidly growing bodies. That is why an exposure that for an adult has no effect may, for a child, cause life- long harm, as witness lead poisoning. Regulatory accounting has failed to adequately capture costs and benefits to children from health and other regulations, in part because of a lack of recognition of these differences. Additional problems arise, however, due to some of the assumptions commonly used in cost-benefit analysis, including removing, or at least reducing the visibility of any benefit that could not be monetized. For example, OMB noted about EPA's nonroad rule, that EPA also lists a variety of other benefit categories which it was not able to monetize, ranging from infant mortality to damage to urban ornamental plants. I would say that preventing infant deaths is quite important, but, since EPA didn't monetize that benefit, it doesn't count. Next, ignoring the constraints children operate under: depending on adults for their protection, not making their own choices or aware of the consequences of their actions and without the resources available to adults. These problems are compounded because children of color, or living in lower income communities often face disproportionate environmental health risks, while most cost-benefit analyses assume equal distribution of all costs and benefits across society. This latest guidance compounds these and several other problems in a variety of ways. I'd like to just review two now: an increasing reliance on monetizing, and a rigid adherence to discounting. I'm not arguing against quantification per se, which cannot only be valuable but is possible without resorting to the often artificial, assumption ridden and far from transparent process of translating health or quality of life to dollar figures. Instead, I'm asking, is putting a dollar value on a concept, a value, or a person, particularly a child, either useful or more fundamentally in consonance with basic American values? As our President noted last Thursday evening, how do you measure the benefit of freedom or the immeasurable cost of lost lives, how to measure the value of a parent's love or the religious value that we place on having healthy children? Children's high value to parents is borne out by economic research. For example, one recent paper found that parents have a significantly higher willingness to pay to avoid acute illnesses affecting children than those affecting adults. Now to discounting. In this guidance OMB acknowledges that its practice of discounting benefits in the future has been questioned, in part because such discounting greatly reduces health benefits to children. Let me give you one example of this from last year's budget documents. For us noneconomists, it would seem that, when we prevent the death of a 3-year-old child with a life expectancy of 78 years, that we would have saved 75 life years, while preventing the death of a 40-year- old saves 39 years. With OMB's discount, however, the 40-year- old saves approximately 13.3 discounted life years. And, the 3- year-old? Approximately 14.3 discounted life years. OMB says, and we agree, ``special ethical considerations arise when comparing benefits and costs across generations.'' But then it limits such considerations to the same fine print as that which has not been fully monetized. Finally, this guidance also assumes that overestimated benefits are a greater concern than overestimated costs. This is not supported by real world data, which show that the actual costs of regulations are frequently below the preregulation estimate while the benefits from such regulatory decisions as removing lead from gasoline are more than an order of magnitude higher than predicted. Finally, we agree with OMB when it says, ``when important benefits and costs cannot be expressed in monetary units, then it is less useful, and it can even be misleading.'' Our hope is that OMB will change its guidance to put this important observation into effect. Mr. Ose. Thank you, Rabbi Swartz. [The prepared statement of Rabbi Swartz follows:] [GRAPHIC] [TIFF OMITTED] T6439.089 [GRAPHIC] [TIFF OMITTED] T6439.090 [GRAPHIC] [TIFF OMITTED] T6439.091 [GRAPHIC] [TIFF OMITTED] T6439.092 [GRAPHIC] [TIFF OMITTED] T6439.093 [GRAPHIC] [TIFF OMITTED] T6439.094 [GRAPHIC] [TIFF OMITTED] T6439.095 [GRAPHIC] [TIFF OMITTED] T6439.096 [GRAPHIC] [TIFF OMITTED] T6439.097 [GRAPHIC] [TIFF OMITTED] T6439.098 [GRAPHIC] [TIFF OMITTED] T6439.099 [GRAPHIC] [TIFF OMITTED] T6439.100 [GRAPHIC] [TIFF OMITTED] T6439.101 [GRAPHIC] [TIFF OMITTED] T6439.102 Mr. Ose. Now, as is our practice, we will go to each Member now for questions, to the extent there are questions that don't get answered within their respective 5-minute period. We will have multiple rounds accordingly, as we did with the last panel. I'm willing to lead off. For Dr. Miller, Dr. Hahn and Dr. Tozzi. Actually, I think this is more accurately for Dr. Hahn and Dr. Tozzi. In his written statement, Dr. Miller supports the need for agency input into OMB's annual regulatory accounting report. Do you think the OMB should issue an annual OMB bulletin to the agencies, which would require agency estimates of aggregate and new regulatory burden, as it does in annual OMB bulletins to the agencies for aggregate and new paperwork burden? Dr. Miller supports the need, in his written statement, for the same information on aggregate and new regulatory burden. Dr. Hahn, do you agree with that? Do you think OMB should issue an annual OMB bulletin to the agencies which would require that? Dr. Hahn. I don't know the answer to that, Mr. Chairman. The reason I don't know the answer relates to a fundamental confusion I've heard in some of the testimony today. We operate in a world of finite resources. So we have to make difficult tradeoffs, as Dr. Graham pointed out, among, for example, like investing in certain SUV safety and the like. By the same token, if you're at OIRA, and have a fixed number of employees, you need to consider whether the investment in this new innovation is going to be cost effective, and I simply don't know the answer to that without thinking about it further. Mr. Ose. So, if I understand your question, you don't know whether or not OMB should issue such a bulletin, which would require for regulatory burden much what they require for the paperwork burden? Dr. Hahn. My gut says yes, it's a good idea, but I would want to ask Dr. Graham how it would impact other aspects. I mean, certainly it would be very useful to know much more about the regulatory burdens than we do now. Mr. Ose. Dr. Tozzi, what about your position? Dr. Tozzi. Well, you see I have worked for Dr. Miller a long time, and every day we'd start a staff meeting he'd explain that I was the deputy. But, if I could be relieved of that conflict of interest---- Mr. Ose. By congressional edict you are relieved of that-- -- Dr. Tozzi. Thank you, sir. I want the record to show that. I think there might be a need for a bulletin, but my question is, if you take Dr. Miller's approach, the bulletin would look at measuring aggregate costs across the board, and it would probably help OMB. My question is, if you arrived--my favorite thing of turning this into a regulatory budget, but then the bulletin wouldn't be on total economic costs. There would be a bulletin and it would be a bulletin that turned this into a regulatory budget. So I guess in summary, Mr. Chairman, where I am, I'm in the same church or synagogue, but a different pew. Mr. Ose. Dr. Miller, any response? Dr. Miller. I agree with---- Mr. Ose. That was good, Dr. Tozzi. Dr. Miller. I agree with my colleague, Dr. Tozzi. Actually, I think what we were just talking about is a template and just asking the agencies to present the information in a consistent format, a consistent way. You could better address some of the questions Ms. Heinzerling had about some of these measures if they were in a consistent format across the agencies. If you look at this report, you're struck by the fact that OMB had to grapple with the fact that many of the reports from the agencies are inconsistent one to the other. Even within agencies there are different standards. Mr. Ose. Your concern is we have apples and apples or oranges and oranges rather than apples and oranges? Dr. Miller. Mr. Chairman, I wish I had said it your way. Mr. Ose. I'm not going to measure or match wits with either you or Dr. Tozzi, regardless of which church we all attend. My time has expired. Governor Janklow, for 5 minutes. Mr. Janklow. Dr. Tozzi and Ms. Heinzerling, could you tell me, Dr. Tozzi, do you agree with her analysis, the way she presents it, the factual basis of her analysis? Dr. Tozzi. Governor, I'd like to go through her analysis a little bit more, but I do think Professor Heinzerling is asking the question of what's the limitations of benefit-cost analysis, and it depends where you sit as to where you stand. And, I think she's raised some legitimate concerns that's been raised in the literature for a number of years you can only push this tool so far. But, on the other hand, the macro issue that's been around for years and years, can you ever assign value to a life? And, the question is--before you get into the details of the methods, the question is do you want to? And, implicit in most Federal programs there is a cost, the opportunity cost--there's a cost associated with saving a life, and, so, the issue is how you measure it? And I would defer to the professor here, whether her issues--whether it should be done at all or the methodology for doing so. I think there is an implicit cost and the question that's up for debate is how, and the professor may have a different view on that. Mr. Janklow. Please. Ms. Heinzerling. Yes. I don't think cost benefit of the type that OMB performs should be done, and this doesn't mean that we have to spend an infinite amount of money to save every human life. Most Federal regulation of health and safety and the environment takes economic costs and technological feasibility into account. It puts a thumb on the scales in favor of regulation. It tells an agency please protect health, safety and the environment to the best you can, but don't bankrupt industries, don't bring them to the brink of failure, try to limit plant closings, do what you can in the most efficient way possible. That is the basic framework under which our health, safety and environmental agencies operate. In my opinion, that's a very different charge from saying to them--which you haven't done actually as a body in Congress--saying to them, we would like you to look at the amount that individuals have indicated they are willing to pay for health, safety and the environment, and limit your interventions to that amount. And, it seems to me very different, the numbers may be very different, and the whole enterprise is different when one considers in the first case, let's do the best we can to protect health and the environment; and, in the second place, let's limit our interventions to those the market basically has already produced. Mr. Janklow. Rabbi Swartz, do you disagree with the subject completely of a regulatory budget or do you disagree more so with the procedure that's been followed or suggested? Rabbi Swartz. I think it's an excellent way to lay out the choices, and it would be the second. I think that one can total up costs and benefits in a way that--and here I think, in fact, trying to put a dollar figure on everything gives you more of apples and oranges than would some other ways of explicitly leaving some judgments to lawmakers. For example, I can see the attraction of wanting to compare a traumatic head injury to a cancer to asthma and to have one objective standard that lets you say that so many cases of traumatic head injury equals so many cases of asthma, but there isn't. It's not going to be objective. It's going to be assumption ridden, and so why not instead look at how--what's the most efficient way to combat asthma, what's the most efficient way to combat traumatic head injuries, and then let you, as our elected officials, make the decision about what's most important for our country. Mr. Janklow. Dr. Miller, do you think there's another way to look at the substance as opposed to the procedure in a regulatory budget? Do you agree with Rabbi Swartz? Dr. Miller. I really don't. I really don't. Let me address Professor Heinzerling's initial point that the use of benefit- cost analysis is unlawful: She is welcome to her opinion, but it goes against all the evidence. If it is, in fact, unlawful, someone surely would have sought injunctive relief and no one has. There have been some important cases, such as whether OMB can prevent an agency from meeting a congressionally mandated time table. The Supreme Court held it could not. The Executive orders all start out with ``in so far as'' permitted by law. Obviously, if it's not permitted by law, you can't do it. That point, I think just a red herring. The other question: I don't want to label Professor Heinzerling's or Rabbi Swartz' testimony as necessarily fitting this mold, but so much of what you hear is that you ought not look at benefits and costs at all. It's like coming up with a Federal budget and not expecting people to testify and talk about the relative merits of the various programs. You in Congress have to make those judgments, and basing those judgments on information and analysis is surely better than doing it blindly, and what Dr. Tozzi's been saying, Dr. Hahn's been saying, things like you ought to work on the information and make sure you understand it and do the analysis correctly and make your judgments--it ought to be an informed decision rather than an uninformed decision, and for the life of me, I can't understand why someone would argue you ought to make uninformed decisions rather than informed decisions. Mr. Janklow. Thank you. Mr. Ose. The gentleman from Tennessee for 5 minutes. Mr. Cooper. Thank you, Mr. Chairman. I must admit, I didn't expect to be interested by this panel, but it has intrigued me. You read the title of it and you---- Ms. Heinzerling. We're happy to serve. Mr. Cooper [continuing]. Think, oh, boy, I'd rather be somewhere else. Let's assume for a moment that this regulatory budgeting approach is valid. If it is at the regulatory level, then why isn't it even more important to implement at the congressional voting level, which none of our colleagues would countenance? All the regulation is, is an administrative principle that's within the scope of the statute, but I think we, as Members, realize that we deal with life and death issues, war and peace issues, love and affection issues that are impossible to quantify, and I have the greatest respect for economists and accountants, and I would love to apply their principles to what we do, but, if you take a book like Against the Gods by Peter Bernstein, a study of risk in the world, you realize that even a prominent Wall Street analyst has concluded that much of our knowledge is so new that even Wall Street types are unfamiliar with the quantification techniques. I'd like to point out one paragraph in Ms. Heinzerling's testimony, which I think the average American should focus on if they're looking at this issue. It reads as follows: ``it's hard to overstate the effect of discounting on benefits that will accrue to future generations. In the year 2100, the Census Bureau predicts the population of the United States will be approximately 571 million people. At OMB's 7 percent discount rate, saving the entire population of the United States one century from now becomes equivalent in cost benefit terms to saving about 658,000 people today. With the magic of a calculator, over 570 million lives simply disappear.'' You know, we have to be careful with numbers. The average American has trouble understanding an interest rate, much less a discount rate. We have to have lots of Federal regulations to help people understand what your mortgage lender is doing to you or other lenders. So it's important that we focus on these things, and I would like to ask Dr. Miller and Dr. Tozzi if this is such a great idea, let's not even think of applying it at the congressional level, how about the tax expenditure budget level? Last week we were asked to vote on a tax break for foreign bettors on U.S. horse races. Another tax break was on folks who manufacture bow and arrow sets, presumably for children. I don't think it's in the Pentagon budget. Another tax break was for those who mix diesel fuel with water, which I always thought was illegal, but those are three of the things that we were asked to allow special tax leniency for. Would you suggest applying cost-benefit analyses to each of those provisions? Dr. Tozzi. Sir, it's the--first of all, the idea of a discount rate and where it fits in a regulatory budget is probably a tier 11 issue. The idea of putting a regulatory budget together, just laying out all the regs and their costs in some orderly way, that is such a job and what we're getting down to the discounts rate is how you estimate the cost. OK? And, that is a big issue to the economics profession, I agree, but in terms of a regulatory budget, look at the budget you people look at, several trillion dollars. Has it ever come up to you what the discount rate behind those programs were? Never. And, we're very capable of spending money without that number. So I think there's a lot of technical issues on it, but I don't think we should confuse resolving what the discount rate is and how you can use that opposed to the imposition of a regulatory budget. I think it's way down the line. Dr. Miller. Congressman Cooper, I do not know of any responsible academic who argues that you shouldn't apply discount rate in comparing benefits and costs. That is just totally beyond the pale, as far as academic research goes. On your question of defending these, I would apply benefit-cost analysis to the three issues you raised based--and on your description they would all fail fast. Dr. Tozzi. It depends--maybe yes, maybe no. It depends if I got one. Mr. Cooper. An honest man. I don't think the question is whether it's not appropriate, in theory, to apply discount rates, but no one really knows what a discount rate really is. I used to be an investment banker. They're all over the lot. You can manufacture reports to prove almost anything you want. Ms. Heinzerling has worked for perhaps one of the foremost jurists in this country, as far as economics, Richard Posner. You know, I'm not sure about Justice Brennan's qualifications in that regard. But I think, perhaps, Dr. Miller you should allow more latitude. I think some of these people are responsible. I don't think you meant to apply that they're all irresponsible. And, this is something that we should have a valid and lively debate on. I appreciate you gentlemen raising the issue, but I've never heard a Republican yet say that we should do this for a tax expenditure budget. In fact, the Reagan view is tax expenditures don't exist. It's all the people's money. Dr. Miller. Could I volunteer to be the first? Mr. Cooper. I will look forward to your column on that subject. Dr. Miller. I might write one. But back to the point, you might disagree over what the discount rate might be, and it might be different for different starting points, as Dr. Hahn will probably elaborate. If I misunderstood, I apologize to Professor Heinzerling, but if I understood the import of what you read from her testimony, she would reject the notion of a discount rate--not a question of whether it should be 7 percent or 4 percent or 3 percent or 6 percent, but reject the notion. To me it's just flat out nonsensical. Mr. Ose. The gentleman's time has expired. We'll come around again. Drs. Miller, Hahn and Tozzi, we had a discussion in the first panel about the inclusion of the regulatory accounting statement and its associated report on impacts with the President's budget at submittal time, and Dr. Miller has already offered in his comment that can be delivered concurrent with the President's budget. Dr. Hahn and Dr. Tozzi, do you think delivering those pieces of information concurrent with the budget would increase the overall utility of the information to Congress, or would it make any difference? Dr. Tozzi. Well, before I got on the regulatory budget, I was in the budget business at OMB for a long time, and I think the budget side of OMB is going to oppose that very, very heavily and I will tell you why. First of all, if you compare the accuracy in their mind of the data in the Federal budget that's up for appropriation, with what will come out of this system, in this current system, and put the OMB stamp of approval on it, I think there's going to be a big debate on that. So, I think there's going to be a reluctance within the institution to do that. Second, I think there's going to be an overall resistance because of the nature of who uses the budget, and it goes up through the budget shops of all the agencies, and you're going to have a lot of procedural work to be done to match two information flows, all the regulatory people into that budget process. So I can't argue. I agree with Dr. Miller that in the long run, that if we had a regulatory budget and the numbers were of sufficient accuracy, I agree they could be mixed. I think in the short run, I'd rather have the limited resources again turning this into a regulatory budget and marry them at a later stage in time with the Federal budget when the data is of comparable accuracy. Mr. Ose. Let me come back to that question. Dr. Hahn, do you share that opinion? Dr. Hahn. Yes, I basically share that opinion. Mr. Ose. Going back to your point about the unified agenda there being the more interesting document, how much time--if we're not going to pare this regulatory accounting statement with the President's budget, how much time do you think should elapse between the submittal of the President's budget and the issuance of these---- Dr. Tozzi. Well, that's a good question. Fortunately this comes out every 6 months and so it has a lot more real time information in it than the President's budget. It's supposed to be due out in October or April, and they've been pretty good recently. They've been missing it by a month. So what you'll see, Mr. Chairman, if they meet these dates, you'll have a picture of the regulatory state 2 or 3 months before the budget comes out and 2 or 3 months after the budget comes out. Now, if at some point in time you wanted to marry these, I think that could be done, but I don't think that would be the main problem right now. The main problem is taking the steps procedurally to turn this into a regulatory budget. I don't think that 3 months one way or the other, before or after that system is a big handicap. Mr. Ose. Chronologically, the President drops his budget in---- Dr. Tozzi. January/February. Mr. Ose. Yes, early February. At least the House calendar moves to adopt the budget by April 15. Now, how do we reconcile that timeframe? Because it would seem to me that the Budget Committee would need the regulatory accounting statement in order to decide how they want to allocate resources. Dr. Tozzi. Correct, and what I'm suggesting is they're going to have two documents because between October of 1 year and April the following year, the changes in total macro costs could be substantial, I doubt it. And, second, if they would have enough time to work on the October edition well before that markup, because if we come out in April with this, it's too late for them to do it, but I don't think--the numbers have to bear themselves out. I just don't think with a document this size, unless there's some really unusual rule which comes out, October numbers would not be that bad to work on each year because you'd work with the October budget for the early markups. By the time you had final markup, you'd have the April edition. Mr. Ose. My time has expired. I'm going to come back to this question. Governor Janklow. Mr. Janklow. Rabbi Swartz, last year Susan Dudley, when she gave testimony before this committee, said, ``Studies reveal that a reallocation of current spending from lower risk to higher risk problems could greatly increase the lifesaving benefits of regulations designed to reduce health and safety risks and achieve other goals.'' If this is correct, if what she says is correct, isn't regulatory accounting really essential to better protect public health and safety? Rabbi Swartz. The thing that I think is really important to remember, and I think it was Dr. Tozzi who mentioned this, is that this is a tool, and it's going to have some use but it's not going to do your job for you, and for example, in terms of comparing risks, one piece of information that's very helpful when you're making decisions about risk is what's the most frequent risk, but risk for what? Is it risk for being a fashion catastrophe or a terrorist catastrophe? So, you want to see the size of the effect, and you also want to see is it a reversible effect or not? Is it something you can fix easily or something that's basically irreversible? Mr. Janklow. But, if we don't know the costs or the benefits of a regulation, then how do we really know if--we say we're trying to do, we're doing it in people---- Rabbi Swartz. I'm sorry. I'm not arguing against measuring costs and benefits. What I'm arguing about is a way that does, that says that the only thing you measure are dollar values. Mr. Janklow. Could you make available to us or your organization--and frankly, I don't know if they're the same sir, because I don't know you folks that well. Could you make available to the committee what methodology you don't like that's being followed or recommended, and what methodology you suggest should be used for a regulatory accounting approach? Rabbi Swartz. Sure, and along that line I would--I'm a little intimidated correcting Dr. Miller's notion of the economic field, but I know at least six economists who are well published, well regarded in the field who have written about the inappropriateness of discount rates under certain circumstances. I'm not, and I don't think that Professor Heinzerling is saying you never use discount rates, but discounting health benefits has some fundamental theoretical problems. And, you can read those in Richard Howarth at Dartmouth, or Edward Barbier at the University of Wyoming, or Jane Hall at Fullerton and---- Mr. Janklow. But I'm also suggesting, sir, if you'd make available to us what is it that you suggest should be the measuring criteria. Rabbi Swartz. Sure. I would be glad to. [The information referred to follows:] [GRAPHIC] [TIFF OMITTED] T6439.103 Mr. Janklow. Could you do the same thing too, Dr. Heinzerling, also? Ms. Heinzerling. Absolutely. Absolutely. I think you'll find that it's reflected in many of our current laws, the approach that I'll provide for you. But absolutely I'd like to do that. [The information referred to follows:] [GRAPHIC] [TIFF OMITTED] T6439.104 [GRAPHIC] [TIFF OMITTED] T6439.105 [GRAPHIC] [TIFF OMITTED] T6439.106 [GRAPHIC] [TIFF OMITTED] T6439.107 [GRAPHIC] [TIFF OMITTED] T6439.108 [GRAPHIC] [TIFF OMITTED] T6439.109 [GRAPHIC] [TIFF OMITTED] T6439.110 Mr. Janklow. Do you think the current law that we have is the best we can do? Ms. Heinzerling. No. I would never say that but I don't think that cost-benefit analysis is going to improve the ways in which I think the current system fails. For one thing, the current system fails to regulate many risks as stringently as I think should be required. Second, cost-benefit analysis adds to the informational burdens already borne by the agencies. It's expensive. It's time consuming. It's contentious, it leads to litigation. At the end of the day, nobody's satisfied with it, and so, yes, I think that there are places where we could improve things. I think economists have really helped us out in many ways by pointing out ways in which social goals can be achieved more cheaply. I think that all of that is all to the good. I don't think that the system will be improved by reducing everything to dollars and then discounting them over a period of time. Mr. Janklow. Thank you. Dr. Hahn you're smiling. Why? Dr. Hahn. Yes. Professor Stigler, may he rest in peace--he was a Nobel Laureate in economics said, ``It takes a theory to beat a theory.'' I think one of the problems with all these criticisms, you put your finger on it, is they don't really have a theory that beats the implementation of cost-benefit analysis in a broad sense. It just defies common sense to say you shouldn't think about what the costs and benefits are before you make a decision either individually or socially. Mr. Janklow. Thank you. Dr. Miller. Could I just add one point sir? You might ask the question, can benefit-cost analysis be misapplied? The answer is, of course. It's done all the time, and that is one reason some very good people criticize benefit-cost analysis. I'm not trying to defend all benefit-cost analysis. I have criticized my share. I have sent some back when I was OIRA head. The question, though, is whether it is a useful tool; and the answer is, yes, it is a very useful tool. Broadly defined, benefit-cost analysis, as Dr. Hahn was suggesting, is what you think when you make your decision--should I go this way or that way? And, even if you don't tote up and monetize benefits and costs, you're revealing that you think this way is better than that way when you take the former path. Mr. Ose. The gentleman's time is expired. The gentleman from Tennessee for 5 minutes and 45 seconds. Mr. Cooper. I thank the Chair. There are many failings of government. We all realize that our budgeting process does not rely on accrual accounting. We don't have a capital budget. Lots of things that Congress has decided we do not need to have because we're not like a corporation. We're different. When Dr. Hahn said it takes a theory to beat a theory, I thought our theory was the Constitution of the United States and the Bill of Rights, things like that; essentially human documents that do not tell, for example--every jury has to rely on cost- benefit analysis before they issue a verdict. I can't help but wonder if some liberals might not--should be for this regulatory budgeting concept, because my guess is the foreign aid budget of the United States would have to be multiplied 100 or 200-fold, since the fee to keep alive in a foreign country might take as little as $1 a day; and, yet, we in our country, our infinite wisdom, choose not to do that. Then the question of whether their lives are worth less than our lives over here. To me, I love accounting and economics. I think it's great. I think we should apply these tools when and if appropriate, but I'm deeply worried that we might be creating a little bit of a monster here that--not to preclude any of this analysis, but to wholesale stop regulations as Dr. Graham seems to have. It seems to me that maybe we're allowing the tools to control the master here, especially when so few people in the general public are equipped at all to deal with these tools. You know, there are some great economists who proved that there's no such thing as a hot streak in basketball. Each shot is independent. But tell that to a sports fan, you know. They would no more believe you than they would have believed pre- Galileo that the Earth was round. You know, we have to work with what we've got here, which are human beings. And, to me, we need to gradually introduce these tools when and if appropriate, and then see if we can improve the wisdom of our decisions as we go along. Is that-- Dr. Hahn. Dr. Hahn. If I understand you Congressman Cooper, I agree with you, only you said it more eloquently than I would have. I'm not suggesting that the results of a cost-benefit analysis that a good economist does should be decisive in the sense that it should immediately be implemented. What I am suggesting is that toting up the benefits and costs, both those that can be quantified and those that can't in some systematic fashion, can usefully inform decisionmaking when we're making multibillion-dollar decisions, as we do in regulatory agencies every day, not that they would necessarily be decisive. Mr. Cooper. We're having a huge fight here now in dynamic scoring. We can't decide when or if to apply that, and that is relatively simple in comparison to these decisions. But, that's the current state of play in Congress right now is--I don't think we've picked a new head of the Joint Tax committee, have we? We do have Dr. Hosaka and the CBO, and I'm sure he delivered a crushing blow to dynamic scoring--this was last week--when he was expected to deliver a much more favorable scoring of the President's budget than in fact he turned in. But, to me it's exciting to contemplate these new tools, but, they're so primitive, as I think Dr. Bernstein pointed out in his book. I had no idea as a relatively young economist that so many of these things were so recently invented. The human mind has a long way to go before we fully understand a lot of these things, but, I thank the Chair and yield back the balance of my time. Mr. Ose. The gentleman yields back. Dr. Miller, Hahn and Tozzi, the President's budget comes out with a 7-year analysis in terms of the impact of its proposals. It's got the past year, the current year, the budget year and the 4 following outyears. Now, the question I have is whether or not it would be helpful to Congress so that the on-budget and off-budget costs of that budget--the President's budget--could be evaluated in a simultaneous or concurrent fashion. Do you think that would be positive or negative? Dr. Miller. Dr. Miller. I think it would be positive, but I have said many, many times I think Congress can get carried away with looking at the outyears. The aggregate figures for spending and for revenues, are not very reliable. Mr. Ose. So we have to recognize that those are projections, of course. Dr. Miller. Yes. And the same thing with regulation; though your question triggers the question of whether they're more reliable than the fiscal figures. If you're looking at the deficit figures, they probably have the variance that is much higher than the variance on major regulations. Mr. Ose. So, at least for the past year, the current year, the budget year, it might be useful. Dr. Miller. Yes. Mr. Ose. But, as you move out, your variation--I mean, your---- Dr. Miller. Confidence interval. Mr. Ose [continuing]. Confidence interval gets higher and higher and higher. Dr. Hahn. Dr. Hahn. I agree with what Dr. Miller said. I think it is a good idea, given my own belief and what the research of others suggests, that regulation has a reasonably big impact on the economy; that you, as our decisionmakers, are given the kind of information you need to see that. So, I would be for informing you in that way. Mr. Ose. Dr. Tozzi. Dr. Tozzi. Sir, I don't think that data are available. When we put the budget for President Carter together, the regulatory budget, what we did was an incremental regulatory budget. We took the cost of all pending regulations over--that were coming out, and the problem is the data base has a total cost of the regs, but we had no idea if you were going to put $1 billion for a clean air reg, what the expenditures by thousands of companies were going to be over the ensuing years. So, I don't think that data are available, and I think the initial effort on a regulatory budget would be looking at the incremental total costs imposed by that regulatory menu and then developing some algorithm of how you set a total on it. I think trying to spread those macrocosts on a year-by-year basis are going to be very difficult. I haven't seen any data base even close to that that will allow us to do it. Mr. Ose. So, to use Mr. Cooper's word, it's pretty dynamic, isn't it? Dr. Tozzi. Dynamic, I think is sort of a yuppie term for budgeting. I'm not sure what it is. Mr. Ose. This issue of a pilot test for regulatory budgeting, Dr. Miller, I'd be curious as to your feedback as to whether or not it's useful. I don't know which agency or program you might pick, but in terms of setting up a pilot program for regulatory budget approach, do you think it would be useful; which agency do you think you probably want to use as the template; and what would you expect to achieve? Dr. Miller. That is a good question. I mean, I would address one of the larger regulatory agencies, one that has reasonably good data on benefits and cost, one whose regs tend to be reasonably homogeneous and comparable, and then maybe even a component of that. Say, for EPA--might do just the air part. The authorizing committee could insist the agencies do that in cooperation with OMB and talk about the total costs imposed upon the private sector. They could force the agencies to address how they might establish priorities and yield more cost-effective results. That is, everything else equal, for the cost it imposes upon the private sector, how to get greater benefits--or alternatively, for the same benefits how to lower costs; the same kind of things you demand of agencies when you talk about appropriating money for programs. You ask them to give you information about how to accomplish the goals most efficiently. In response to Mr. Cooper--I'm sorry he's left. What we're proposing here and discussed before is that Members of Congress make those determinations. I just think that you ought to be more informed rather than less informed, and doing a regulatory budget would be a way of your getting a handle on what the agency does and force them to be more cost-effective and get them thinking the right way about this--responding to the public which pays their salaries. Mr. Ose. Five minutes is awfully short. Governor, we're going to go to 10-minute rounds, and you're going to be first. Mr. Janklow. I'm going to be very brief, Mr. Chairman. Dr. Tozzi, back when President Carter was a candidate for President, coming off his tenure as a Chief Executive of Georgia, he was a strong proponent and advocate of what they called in those days zero-based budgeting. Did you ever attempt to do that during his administration, and was there any success at all, or what was your--the analysis, if it was tried? And, I don't know if it was. Dr. Tozzi. Yes, sir. At that point in time, I was Chief of the Environment Branch in OMB and I had jurisdiction over EPA's programs and a couple of other environmental programs. And, President Carter's zero-based budgeting looked at--there was no base to any program, and we would rank-order all of the programs. And, I will say that was the third or fourth such big system I helped put in. President Johnson put in PPBS, Planning Programming Budgeting System. President Carter put in zero- based budgeting. The Nixon administration put in management by objective. And you name it and I was there. OK? That is the reason I---- Mr. Janklow. Have you recorded all of this for the National Archives? Dr. Tozzi. Not on the record, sir. The question is that's why my reluctance to put any big governmentwide system on cost accounting in. I think the process of setting a regulatory budget where you put--just simply put all the regs in an agency in one place, people look at them and debate the merits of those. They look at individual things on the entrees and say, hey, are you going to look at this alternative? What cost information? And, you come up with an identified menu of what you're going to do, the way to go to get all the details of how you do the discount rates and setting up the regulatory budget look--they want a base. They want to know all the costs of existing programs. I think that is a humongous exercise that maybe goes the way of some of these other exercises. If you look at a regulatory budget, incremental costs that are going to be put on that or quantified, I think you can do something; but, I'm reluctant to say you're going to have right now a regulatory system that looks at all the costs of all the regs of every Federal Government agency and totals them up. I think that's a big job and may go the way of those other 15 things I worked on. Mr. Janklow. Dr. Hahn, you're shaking your head no and commenting to Dr. Miller. Go ahead. Dr. Hahn. No. I think most people are talking about doing a regulatory budget. This is just in response to Dr. Tozzi. You're talking about at least trying it out with respect to a pilot program, in response to your question; and also incrementally, the new regulations, what impact will they have over time and how do we prioritize them. Mr. Janklow. Rabbi Swartz, given Dr. Tozzi's explanation of what he thinks we ought to do, do you disagree with that, and, if so, why? Rabbi Swartz. I don't. As Dr. Hahn said to an earlier question, the key would be to get more information from this than it adds burden to the various agencies. They do have limited staffs and limited resources. So I would want to make sure that the information you get out of it is worth as much to you as the time that they can't be doing the other parts of their job. And, I can't make that judgment. I don't have the expertise to do that. But, that's what I would look at. Mr. Janklow. That's all I have, Mr. Chairman. Thank you. Mr. Ose. I think one of the curious things that I hear is that on a day-to-day-to-day basis, all of us who sit on this side of the microphone struggle with how to allocate resources. I mean, Rabbi Swartz, you just said something that I thought was particularly insightful, and that was that we're not sitting out at the agencies making the day-to-day decisions to--is this consultant or is this person going to dedicate their time to evaluate the cost and the benefits of this program, or are they going to go implement the system? It's not our role. Our role is to decide, all right, we're going to put X number of resources here, Y number there, and Z number there. Now, what I'm trying to get to is some year-after-year- after-year means of tracking what Congress authorizes, allocates, and appropriates against the benefit that we get as a country from those authorizations, allocations, and appropriations, and then somehow or another reconcile that with the unauthorized or unappropriated burden that we put on the American--on the United States as a whole. I think we have, frankly, some difficulty in deciding what the priorities should be. I mean, that's why we have at least two different parties. But, I don't think anybody struggles terribly hard with the need to at least prioritize. Now, I want to just go through here and understand the degree to which this tool can be used, this regulatory accounting tool can be used. I mean, I hear from Dr. Miller that it is a tool and only a tool. I hear, perhaps, Rabbi Swartz suggesting that the tool has severe limitations. Would you care--I mean, Doctor, would you care to--we're going to go right down the dias here, the table. I want to give you an opportunity here, before we close, to evaluate the validity of the information that we might get out of a regulatory accounting proposal. Dr. Miller. Oh, I think it could be very useful, and if you push the agencies to give it a high priority, it would be reasonably accurate and to the point and will help the quality of your decisionmaking a lot. Even if you disagree over priorities, you and your colleagues, you're more likely to come up with something that makes sense than if you are in the dark about a lot of these things. So, the more information you have, the better. The better the analysis, the better your decisions. And, the point that I have made and you've made before is compared to all of this intense scrutiny and work that is done on the appropriations process, which accounts in the discretionary side for less than the total resources commanded by regulation, the amount of focus on regulation is de minimis. Mr. Ose. Dr. Hahn. Dr. Hahn. I think the regulatory accounting proposal has a lot of merit. I think we have to take stock of where we are now. My research and that of others suggests that the regulatory analyses that the agencies are doing, while quite variable in quality, are frequently poor and not summarized very well. And, it's not put into the kinds of statements that would be useful for you, as you were suggesting. So, I think moves in that direction would be very constructive. Mr. Ose. Dr. Tozzi. Dr. Tozzi. Mr. Chairman, what I am recommending is not that you propose a regulatory accounting system, I'm recommending that you start a regulatory budgeting system, which would mean that you would take this document before me, and as Dr. Miller said, look at one component of an agency. Here's EPA, which obviously--because I think they do a pretty good job. There's 100 regulations under development in this document; and the regulatory budget to me, the first start would be a debate on two things: Which of those resources--which of those should go forward, which ones should you put money on to work on; and second, within a reg, what alternatives should be looked at? What is its timeframe? And, there should be a debate on that, and the Congress would act on this menu. I do not need at this point in time a massive regulatory accounting system to do that. You could implement it out of this book. It's a regulatory budget. Doesn't have numbers in it, but it's the same as a Federal budget. You could look at that and debate the programs, make a decision of what goes in this document, and an informed congressional debate on each of these programs. And, I don't need the regulatory accounting system to do that right now. Mr. Ose. Professor Heinzerling. Ms. Heinzerling. I think part of the premise of your question is that we would have more information if we had a regulatory accounting requirement. And, I would just point out that we have a huge amount of information about regulations already. We're swimming in information. The agencies are practically paralyzed by analytical requirements. And, so the first thing I would ask is, what good would this regulatory requirement do in comparison to the system that we already have? I would agree--I don't agree with everything Dr. Graham says, but, today, I agree very much with something he said, which is that, if we had such a system, we have to remember to look at benefits as well, and not just at costs. And, so the hesitation I would have, in addition to the one I just stated, is that we would want to be able to look at the benefits that are gained by these programs and not just the costs. And, the other observation I would make is that I think it seems to me that all of the witnesses here have agreed, even if they like regulatory accounting or regulatory budgeting, which are different things, if they like either one or both of those things, they don't think we should start by imposing this requirement on all of the agencies at once. And, I just point out again the mystery here, which is that Dr. Miller suggests we start with EPA as an example, and yet here again the puzzle that I opened with remains; which is, if EPA has some of the biggest regulatory bargains around, why are we starting with this agency and starting with something that might hobble it even further? The last point I'd simply make is that I'm not aware of-- and I'd be happy to see cites. I'm not aware of analysis that does a cost-benefit analysis on cost-benefit analysis. I think it would be very interesting to see that. Mr. Ose. Rabbi Swartz--that was well put. Rabbi Swartz. I want to second Professor Heinzerling's point about the sea of information; and certainly in an ideal world, the more information the better. But, you don't live in an ideal world. You live in the real world. And, you have limited staff and limited ability to take stuff in, too. So, you're going to need summaries, and it makes those summaries more palatable if they're all in the same format. And, that requires things to be translated from one kind of information to another. And, if there is one thing that I know that I'm more expert in than anybody else on this panel, it's how controversial translating is. You can gain or lose a lot of information in the translation, depending on how good the original information is and how good the translator is. So there are going to be costs to try to get everything-- every piece of information the same way. Is it good to have a summary of it? It is great to have a summary that at least puts things in the columns--here are all the costs and here are all the benefits--whether they are tabulated or not. I think that would be very useful. But the extra tweaking you have to do to be able to get a single number on each side may cost you more than it gains you. Mr. Ose. Governor, you have anything you want to add? Mr. Janklow. No, I don't. Thank you very much to all of you, and I think your comments at the end are really appropriate. We just have to figure out how to move forward in a sensible way, because I don't think anybody questions the fact there has to be a cost-benefit understanding of what it is that we do when we're taking money from taxpayers and spending their money. Mr. Ose. I thank the gentleman from South Dakota. I want to express my appreciation to the panel that joined us for our second session today. We're going to leave the record open for 10 days in case there are Members who wish to submit written questions, and we would appreciate your timely responses to that. I am grateful for your taking the time today, and I'm sure we'll have at least another meeting or two on regulatory accounting in the future. Have a great day. We're adjourned. 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