STATEMENT OF
JOHN D. GRAHAM, PH.D.
ADMINISTRATOR,
OFFICE OF INFORMATION AND REGULATORY AFFAIRS
BEFORE THE
SUBCOMMITTEE ON REGULATORY AFFAIRS
OF THE
COMMITTEE ON GOVERNMENT REFORM
UNITED STATES HOUSE OF REPRESENTATIVES
April 12, 2005
Madam Chairman, and Members of this Committee, I am John
D. Graham, Ph.D., Administrator, Office of Information and Regulatory
Affairs, Office of Management and Budget. Thank you for inviting me to
this hearing and for giving me the opportunity to testify today on the
reform of regulations that impact the United States manufacturing sector.
Modernizing and streamlining the sea of existing federal
regulations is an immense and humbling challenge. Since OMB began to keep
records in 1981, there have been 115,966 final rules published in the
Federal Register by federal agencies. Of these published rules, 19,538
were formally reviewed by OMB prior to publication. Of the OMB-reviewed
rules, 1,068 were considered "major" or "economically significant"
rules, primarily because they were estimated to have an economic impact
greater than $100 million in any one year.
Sad as it is to say, most of these existing federal rules
have never been evaluated to determine whether they have worked as intended
and what their actual benefits and costs have been. During President Bush's
first term, OMB initiated a program to take a second look at a limited
number of these existing regulations, guidance documents, and paperwork
requirements, as we are authorized to do under what’s known as the
Regulatory Right to Know Act.1 Our February,
2004 request for reform nominations, with a clear focus on the manufacturing
sector of the U.S. economy, was the third such solicitation of reforms
undertaken by this Administration.
To briefly summarize the previous reform initiatives,
in 2001 OMB requested public nominations of rules that should be rescinded
or modified. We received 71 nominations from 33 commenters, and OMB determined
that 23 of the nominations should be treated as "high priority"
review candidates. Federal agencies have taken at least some action (e.g.,
a proposed or final rule) on nearly 75% of these reform nominations. Overall,
OMB regards the 2001 solicitation as a successful endeavor. In 2002, OMB
again requested public nominations of reforms. In an important innovation,
we included guidance documents and paperwork requirements, as well as
rules, within the scope of the solicitation. We received 316 distinct
reform nominations from more than 1,700 commenters. OMB and the agencies
determined that 156 of the nominations should be referred to agencies
for their consideration. In 2002, OMB did not attempt to define "high
priority" reforms for two reasons: the large volume of nominations
exceeded the capabilities of OIRA staff to evaluate them; and we felt
the agencies might take greater ownership of reforms if they decided which
were to be treated as a priority. We have determined, however, that only
about 1/3 of the 2002 nominations referred to the agencies have resulted
in agency action. Appendix D of our 2004 final Report to Congress on the
Costs and Benefits of Federal Regulation2
contains an item-by-item update on the status of each of the 2001 and
2002 nominations as of December, 2004.
We decided to focus our 2004 regulatory reform initiative
on the manufacturing sector, which is one of the most heavily regulated
sectors of our economy. In the 2004 Economic Report of the President,
the Council of Economic Advisors found that the recent economic downturn
hit the manufacturing sector hard, starting earlier and lasting longer
in that sector of the economy. The Department of Commerce, in their 2004
report Manufacturing in America, recommended regulatory reform
as a key activity government can undertake to ensure the continued competitiveness
of U.S. manufacturing. Since U.S. manufacturers compete with firms from
both developed and developing countries in an increasingly global economy,
the Administration believes it is critical that any unnecessary regulatory
burdens be removed.
We also applied the lessons learned from the 2001 and
2002 processes to our latest round of reform requests. First, we offered
additional guidance to commenters on how to suggest reforms. We asked
that commenters try and make a benefit-cost case for the reform, as many
of the rules that are potential reform candidates undoubtedly generate
substantial benefits. We also recommended that commenters focus on reforms
that agencies can move forward on without statutory change. Our experience
with previous years taught us that these are the types of reform suggestions
that are likely to lead to agency actions.
In December 2004, OMB released for agency review the 189
reform nominations that were submitted by 41 industry and non-profit groups
in response to our request. OMB instructed federal agencies to review
the merits of each of the reform nominations and prepare a response for
OMB. The responses included a determination as to whether reform action
is appropriate, and if appropriate a time-line for action and a plan for
public participation. OMB evaluated the reform nominations and collaborated
with federal agencies in the development of response plans. OMB also sought
evaluations of the recommendations by the Advocacy Office of the Small
Business Administration and the Department of Commerce's Office of the
Assistant Secretary for Manufacturing and Services.
Of the 189 nominations, 76 were selected by the agencies
and OMB for priority consideration and action by the Bush Administration.
OMB's report on Regulatory Reform of the U.S. Manufacturing Sector3
summarizes each of the 76 reform nominations and the time-specified steps
Federal agencies will take to address them. The majority of the 76 reform
nominations address programs administered by the Environmental Protection
Agency and the Department of Labor, a pattern that reflects the large
impact of environmental and labor regulation on this sector of the economy.
Recommended actions range from gathering and reporting additional information
to issuing modernized regulations.
Many of the regulations recommended for reform may be
instances where the rule regulates to what Justice Stephen Breyer in his
book Breaking the Vicious Circle has called “the last 10 percent,”
where a regulatory bar is set so high that it imposes unnecessarily large
costs for little to no additional benefit. For example, a nomination for
reform at EPA (number 117) recommends modifications to the Industrial
Pretreatment Program rules regarding wastewater sampling. Currently, industrial
facilities discharging to sewage treatment plants must regularly sample
their wastewater for all nationally regulated pollutants listed for their
industry, even if they do not use the substance and have no possibility
of discharging it. The commenter, the Copper and Brass Fabricators Council,
suggested allowing this requirement to be waived if a facility can demonstrate
that it does not use the pollutant, and thus the pollutant would not be
present in its wastewater. EPA proposed similar modifications in 1999
but never finalized the rule. In response to the final report, EPA has
agreed to publish the final rule in an expedited manner in June of 2005.
In closing, OMB is dedicated to this initiative; we will
oversee the reform process to make sure that agencies make adequate progress
in the months and years ahead. Thank you very much for the opportunity
to participate today in this very important hearing.
1
Section 624 of the Treasury and General Government Appropriations Act
of 2001 (31 U.S.C. § 1105 note, Pub. L. 106-554)
2
Available on our website at /omb/inforeg/regpol-reports_congress.html
3
Available on our website at /omb/inforeg/regpol-reports_congress.html