JOHN D. GRAHAM, PH.D.
OFFICE OF INFORMATION AND REGULATORY AFFAIRS
SMALL BUSINESS COMMITTEE
UNITED STATES HOUSE OF REPRESENTATIVES
May 19, 2004
Mr. Chairman, and Members of this Committee, thank you
for inviting me to this hearing to discuss our initiative on regulatory
reform. 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
First, I would like to briefly describe to the Committee
the origins of our manufacturing reform initiative. Streamlining regulation
is a key plank in the President’s Six-Point Plan for the Economy.
The last twenty years have witnessed an explosion of new federal rules
and paperwork requirements that burden consumers, businesses, taxpayers
and State and local governments. Many of these regulations undoubtedly
are essential to protect consumers, workers and the environment; however,
their cumulative burden is onerous, especially for small businesses and
others trying to create new jobs. Recent studies show that regulations
have significantly raised the cost of doing business in the United States,
especially for manufacturers.
The Administration is moving on several fronts to facilitate
the streamlining of regulation. First, we have insisted that new federal
regulations be supported by good science and economics to ensure that
they are necessary and cost effective, and have worked closely with the
Congress to limit the number of new laws that would spawn unnecessary
regulatory burdens. We are happy to report significant success in this
regard: even by conservative estimates, this Administration has slowed
the growth of burdensome new rules by at least 75% when compared to the
previous Administration, while still moving forward with crucial safeguards
for homeland security, human health, and environmental protection.
We are also working to streamline the sea of existing
federal regulations, which is a humbling and difficult task. As with the
federal budget, actually shrinking the absolute burden of imposed regulatory
cost is much more difficult than slowing its growth. Our primary approach
to date has been a series of solicitations for reform nominations. As
a result of our first two reform solicitations in 2001 and 2002, the Administration
is working on reforms to over 100 rules, guidance documents, and paperwork
In OMB’s 2004 Draft Report on the Congress on the
Costs and Benefits of Federal Regulation on February 13, 2004, we included
an expanded review of the impacts of regulations on small business, and
an expanded review of the impact of regulation on the manufacturing sector.
In short, 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. We also found that the cumulative regulatory burdens on
the manufacturing sector are larger than the costs imposed on other sectors
of the economy -- and disproportionately large for small and medium-sized
manufacturers. One study found that manufacturing firms face a regulatory
burden approximately 5 times greater than the average firm, and even when
adjusted by the number of employees, manufacturing firms face a regulatory
burden per employee approximately 1.7 times greater than the average firm.
Environmental regulations impose the largest burden; followed by economic
regulations, which include direct controls on the structure of certain
markets; tax compliance; and workplace rules; which include categories
such as employee benefits, occupational safety and health, and labor standards.
In addition to our work on this issue, the President's
Council of Economic Advisors recently reported that, while manufacturing
is beginning to share in the economic recovery, the rebound in manufacturing
employment has not been as rapid as in other sectors. A recent Commerce
Department report included a broad-based review of manufacturing policy
and also recommended that federal regulations be re-examined for reform.
Because of these findings, we decided to launch this Administration’s
3rd solicitation of reform nominations, and for this reform initiative
we decided to solicit reforms relevant to the manufacturing sector. We
encouraged commenters to suggest specific reforms to regulations, guidance
documents or paperwork requirements that would improve manufacturing regulation
by reducing unnecessary costs, increasing effectiveness, enhancing competitiveness,
reducing uncertainty and increasing flexibility. We are particularly interested
in reforms that address burdens on small and medium-sized small manufacturers,
where burdens tend to be relatively large. In addition, because studies
have found that tax compliance was particularly burdensome for small businesses,
we solicited nominations on ways to simplify IRS paperwork requirements.
In the report, we requested that commenters concentrate
on presenting us, to the extent possible, a quantitative or qualitative
benefit-cost case that can be made for the reform. We must approach regulatory
reform with care because many rules governing this sector may produce
substantial benefits for workers, consumers and the environment. Even
where the benefits of rules are substantial, it makes sense to search
for more cost-effective ways of achieving those benefits; for example,
replacing outdated command and control regulations with market-based policy
instruments. Whenever the costs of rules are substantial, the search for
cost-effective reforms is critical.
We also requested that commenters focus on reforms that
the agency or multiple agencies have statutory authority to make. Even
nominations that agencies have the authority to pursue often require notice
and comment rulemaking, thus it is likely to require a bit of time to
enact a substantial number of reforms.
Reform nominations are due at OMB by May 20, 2004, and
we will release those nominations as soon as possible. In consultation
with the relevant departments and agencies, we will then identify a group
of promising reform nominations. Our 2004 Final Report to Congress on
the Costs and Benefits of Federal Regulation will report in detail on
the progress on this initiative.
In closing, let me assure you that this Administration
understands the needs for regulatory reform of the manufacturing sector.
The progress we have made so far is a direct result of the President’s
leadership. Reining-in regulatory costs is a critical part of the President’s
six-point plan to stimulate the economy, create jobs and foster economic
prosperity for all Americans. We also acknowledge that we have a considerable
way to go.
Thank you very much for the opportunity to appear today.
I am willing to answer any questions you may have.