JOHN D. GRAHAM, PH.D.
OFFICE OF INFORMATION AND REGULATORY AFFAIRS
SUBCOMMITTEE ON ENERGY POLICY, NATURAL RESOURCES
AND REGULATORY AFFAIRS
UNITED STATES HOUSE OF REPRESENTATIVES
February 25, 2004
and Members of this Subcommittee, thank you for inviting me to this hearing.
I am John D. Graham, Ph.D., Administrator, Office of Information and Regulatory
Affairs, Office of Management and Budget. Prior to joining the Bush Administration,
I served as a faculty member at the Harvard School of Public Health, where
I founded and directed the Harvard Center for Risk Analysis.
Since I testified
last year before this subcommittee, our office has been working to improve
the regulatory review process and to produce the reports to Congress required
under the Regulatory Right to Know Act1/,
which is the focus of this hearing.
As you know
the Regulatory Right-to-Know Act, also known as the Regulatory Accounting
Act, requires that:
(A) For calendar
year 2002 and each year thereafter, the Director of the Office of Management
and Budget shall prepare and submit to Congress, with the budget, an accounting
statement and associated report containing:
an estimate of the total annual costs and benefits (including quantifiable
and nonquantifiable effects) of Federal rules and paperwork, to the
in the aggregate;
by agency and agency program; and
by major rule;
analysis of impacts of Federal regulation on State, local, and tribal
government, small business, wages, and economic growth; and
recommendations for reform.
(B) The Director
of the Office of Management and Budget shall provide public notice and
an opportunity to comment on the statement and report under subsection
(a) before the statement and report are submitted to Congress.
(C) To implement
this section, the Director of the Office of Management and Budget shall
issue guidelines to agencies to standardize
measures of costs and benefits; and
the format of accounting statements.
(D) The Director
of the Office of Management and Budget shall provide for independent and
external peer review of the guidelines and each accounting statement and
associated report under this section.
Today I would
like to report on the progress we have made in providing the Congress
and the public with the regulatory information and accounting statements
required by the Act. We released the 2004 draft report for comment and
peer review on February 13, 2004, and published a notice of availability
in the Federal Register on February 20, 2004. Since I last testified before
this committee on the issue of regulatory accounting, we also released,
in September, 2003, the 2003 final report. These two reports, which devote
significant attention to regulatory accounting, are the focus of my testimony.
2003 Final Report to Congress
the final version of our sixth report
to Congress in September 2003. The report expands considerably upon
earlier reports, particularly in the area of regulatory accounting. The
report presents estimates for the first time of the costs and benefits
of major regulations reviewed by OMB between October 1, 1992, and March
31, 1995. With the addition of costs and benefits from rules issued during
fiscal year 2002, the report contained estimates for all major rules issued
between October 1, 1992, and September 30, 2002. Overall, the annual quantifiable
benefits of major rules issued during this period were estimated to range
between $146 billion and $231 billion, with their quantifiable costs ranging
between $37 billion and $43 billion. Information on the nonquantifiable
benefits and costs for all major regulations issued during this ten-year
period is found for the individual regulations in the appropriate annual
For the first
time, the report also describes the costs and benefits over a ten-year
period for eight cabinet departments and several agencies and programs.
Most notably, the report indicates that the Clean Air Program in the Environmental
Protection Agency’s Office of Air and Radiation accounts for the
majority of regulatory benefits over the past decade (between $118 billion
and $177 billion).
also updates the status of the 23 high-priority rules OMB suggested for
reform in 2001, based on suggestions we received from commenters regarding
71 regulations involving 17 agencies. Many of these changes would afford
regulatory reform to businesses, and small businesses in particular. Agencies
have already taken action on a number of these suggestions. For example,
the Department of Transportation issued a final rule this past year reforming
the Hours of Service of Truck Drivers, which was the nominated for reform
in both 2001 and 2002. In addition, the Department of Labor issued a proposed
rule reforming the Overtime Compensation Regulations under the Fair Labor
Standards Act, changes which Labor concludes are necessary for the rule
to remain relevant and useful for tomorrow’s workplace.
also contains our Final Guidelines for the Conduct of Regulatory Analysis
and the Format of Accounting Statements, which was also released as OMB
Circular A-4. After first proposing the guidelines in the 2003 draft
report, in collaboration with the President’s Council of Economic
Advisors, OMB revised them based on substantial public comments and peer
review. We also convened a group of agency experts and practitioners to
review and offer suggestions to improve the guidelines. The final guidelines
are designed to help analysts in the regulatory agencies by encouraging
good regulatory impact analysis and standardizing the way that benefits
and costs of Federal regulations are measured and reported. The new guidelines
went into effect on January 1, 2004, for economically significant proposed
rules, and will become effective on January 1, 2005, for economically
significant final rules.
final report also followed up on our solicitation of public comment on
- how federal agencies are currently assessing and managing emerging risks
to human health, safety, and the environment, particularly those risks
that are subject to substantial scientific uncertainty; and
- how agencies could improve the analysis of the benefits and costs of
homeland security proposals.
2004 Draft Report to Congress
the 2004 draft
report on February 13, 2004. It revises the benefit-cost estimates
in last year’s report by updating the estimates to the end of fiscal
year 2003. Like the 2003 report, it uses a ten-year look-back: major federal
regulations cleared by OMB from October 1, 1993, to September 30,
2003, were examined to determine their quantifiable benefits and costs.
The estimated annual benefits range from $62 billion to $168 billion,
while the estimated annual costs range from $34 billion to $39 billion.
It is our intention to continue to report costs and benefits of major
rules using a ten-year look-back.
also reproduces the totals by program we introduced in the 2003 Report.
A substantial portion of both benefits and costs is attributable to a
handful of EPA clean-air rules that reduce public exposure to fine particulate
matter, and the Clean Air Program in EPA continues to account for the
majority of regulatory benefits for rules finalized over the past ten
years (between $35 billion and $115 billion).
to the accounting statement, the 2004 draft report includes an expanded
discussion of the impact of regulations on State, local, and tribal government,
small business, wages, and economic growth.
the report includes an expanded analysis of the impacts of regulations
on small business, using newly released reports from the Office of Advocacy
of the Small Business Administration. The need to be sensitive to the
impact of regulations and paperwork on small business was recognized in
Executive Order 12866, “Regulatory Planning and Review.” The
Executive Order calls on the agencies to tailor their regulations by business
size in order to impose the least burden on society, consistent with obtaining
the regulatory objectives. This Administration’s E.O. 13272 reinforces
the need for agencies to assess the impact of regulations on small businesses,
and OIRA has a Memorandum of Understanding with Advocacy that supports
our review of these analyses.
our report confirms once again the relatively large burden that regulation
imposes on small businesses, and demonstrates the need for an effective
voice for small business during the regulatory review process. In previous
reports, OMB has requested public nominations of promising regulatory
reforms. Agencies have adopted or are continuing to follow up on many
suggestions relevant to small business, including recommendations from
Advocacy, and OMB will continue to seek information from agencies on how
they plan to address their candidates for reform. In addition, OMB will
continue to provide status reports to Congress on agency progress. In
this draft report, OMB requests public nominations of promising regulatory
reforms relevant to the welfare of manufacturing enterprises, especially
small and medium-sized ones. Also, because studies have found that tax
compliance was particularly burdensome for small businesses, OMB is especially
interested in suggestions to simplify IRS paperwork requirements. Comments
will be shared with relevant federal agencies for evaluation and, if meritorious,
implementation. Final reform directions will be outlined in OMB's final
report, to be published later this year.
business report and request for reform nominations complements our recent
activity in connection with the implementation of the Small Business Paperwork
Relief Act of 2002 (SBPRA). OMB, with the help of this Subcommittee, has
undertaken many measures to reduce the paperwork burden that Federal requirements
impose on small businesses, and to facilitate the use of agency information
and resources available to small businesses.
in an October 28, 2003, memorandum to the President’s Management
Council, we informed agencies of their responsibilities under this Act.
In the memorandum, I drew special attention to the December 31, 2003 deadline
for submission of regulatory enforcement reports to Congress. In addition,
this Act requires OMB to publish, on an annual basis, a list of compliance
assistance resources available to small business. Because we thought it
would be helpful for the public to have the list of agency contacts along
with the list of compliance assistance resources, OMB published these
lists together. These lists are available on the OMB website (/omb/inforeg/infocoll.html#sbpra)
and the SBA website (http://www.sba.gov/ombudsman/compliance/dsp_compliance.html).
Finally, as you know, this Act requires the OMB Director or his representative
to convene and chair an interagency task force, which must issue two reports
addressing a total of five specific issues. The first final Task Force
report was delivered to Congress on June 26, 2003 and a Notice of Availability
was published in the Federal Register on June 27, 2003. This Task Force
found that reducing small business paperwork burden is a challenge that
raises both regulatory and information technology issues. The Task Force
also found that the presidential e-government initiatives, such as the
Business Compliance One-Stop Initiative, represent the best opportunity
for reducing the paperwork burden on small business. Since the first Task
Force report was released, the Business Compliance One-Stop Initiative
has been renamed the Business Gateway initiative. The Task Force is already
working on the second report, which is due by June 28, 2004.
draft report also includes an expanded review of the international literature
on the effects of regulation on national economic growth and performance.
Based on a comparison of 130 countries, the ten least regulated economies
are Hong Kong, Singapore, the United States, New Zealand, the United Kingdom,
Canada, Switzerland, Ireland, Australia and the Netherlands. These same
economies have experienced relatively good economic performance measured
by economic growth, per capita income and life expectancy. The adverse
impacts of regulation may be mediated through factors such as the number
of procedures required to start a new business, the time and costs of
registering a new business, and the enforceability of contracts. More
research is needed to determine the precise causal relationships between
regulation and economic growth and performance.
in light of recent concerns about the health of manufacturing in the U.S.,
the draft report reviews the economics literature on the impacts of regulation
on manufacturing enterprises. The review finds that the cumulative costs
of regulation on the manufacturing sector are large compared to other
sectors of the economy. In the report, OMB requests public nominations
of promising regulatory reforms relevant to this sector. In particular,
commenters are requested to suggest specific reforms to rules, guidance
documents or paperwork requirements that would improve manufacturing regulation
by reducing unnecessary costs, increasing effectiveness, enhancing competitiveness,
reducing uncertainty and increasing flexibility. Final reform directions
regarding manufacturing regulations will also be outlined in OMB's final
very much for the opportunity to appear today. I am willing to answer
any questions you may have.
Section 624 of the Treasury and General Government Appropriations
Act, 2001, 31 U.S.C. ' 1105 note, Pub. L. 106-554, '1(a)(3) [Title VI,
' 624], Dec. 21, 2000, 114 Stat. 2763, 2763A-161.