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
November 17, 2004
Mr. 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 immense challenge of modernizing and
streamlining the sea of existing federal regulations. Before discussing
the modest progress we have made, I would like to remind everyone of the
magnitude of the challenge we face.
To the best of our
knowledge, no one has ever tabulated the sheer number of federal regulations
that have been adopted since passage of the Administrative Procedure Act,
or since some earlier historical benchmark. Since OMB began to keep records
in 1981, there have been 109,710 final rules published in the Federal
Register by federal agencies. Of these published rules, 20,029 were formally
reviewed by OMB prior to publication. Of the OMB-reviewed rules, 1,073
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 very
modest program to take a second look at a limited number of these existing
regulations. These re-evaluations are based on the principles of public
participation, agency evaluation, and OMB review of agency actions.
In 2001 OMB requested
public nominations of rules that should be rescinded or modified, with
an emphasis on rules that were obsolete or outmoded. We received 71 nominations
from 33 commentators involving 17 federal agencies. OIRA staff evaluated
these nominations and determined that 23 of the nominations should be
treated as "high priority" review candidates by federal agencies.
Today I am pleased to report that federal agencies have taken at least
some action (e.g., a proposed or final rule) on 17 (or nearly 75%) of
these reform nominations. These actions include FDA’s final rule
requiring that trans-fat be added to the Nutrition Facts Panel,
and DOL’s final rule modernizing the overtime provisions of the
Fair Labor Standards Act. In most cases, these actions have been summarized
in Appendix C of our 2003 final Report to Congress, which provides an
item-by-item summary of the status of each reform nomination. Subsequent
to the publication of that report, several of the rulemakings nominated
for reform have been the subject of judicial actions. In one case (DOE's
revised standards for air conditioners) our action has been overturned
by a federal court. In another case (EPA's safe harbor for routine maintenance
under the New Source Review program), our action has been stayed by a
federal court pending review of the rulemaking on the merits. And in yet
another case, our action (DOT's modernized hours-of-service rule for truckers)
was overturned by a federal court but then reinstated by Congressional
action. Overall, OMB regards the 2001 solicitation as a successful endeavor.
In 2002 OMB again
requested public nominations of rules that should be rescinded or modified.
We also sought nominations of rules that needed to be extended or expanded
and, in an important innovation, included guidance documents and paperwork
requirements as well as rules within the scope of the solicitation. After
an extensive outreach effort to the public, we received a larger response
in 2002 than in 2001, much larger in fact than we expected. We received
316 distinct reform nominations from more than 1,700 commenters. After
an intensive OMB staff review of these nominations, including consultation
with agencies, we determined that 109 of the nominations were already
under consideration at agencies. Another 51 were referred to independent
agencies. The remaining 156 nominations were referred to agencies for
their consideration. In 2002 OMB did not attempt to define "high
priority" reforms for two reasons: (1) the large volume of nominations
exceeded the capabilities of OIRA staff to evaluate them and (2) the agencies,
we felt, might take greater ownership of reforms if they determined which
were to be treated as a priority. Chapter 2 of the 2003 final Report to
Congress provides more information about this process.
We have not yet finished
a precise accounting of how many of the 156 reform nominations have resulted
in some agency action (e.g., a proposed and/or final rule). However, our
preliminary estimate -- based on information in our 2003 Report to Congress
and some limited follow-up with agencies -- is that approximately 55 (about
35%) of these nominations have resulted in agency action.
We did not request
nominations in 2003 because that was the year that we revamped OIRA's
regulatory-analysis guidelines. The result was the publication of OMB
Circular A-4, which now governs agency preparation of economically significant
proposed rulemakings, and will be in force starting in January 1, 2005
for economically significant final rulemakings. Although it is too early
to draw conclusions on how A-4 has impacted agency rulemakings, the preliminary
judgment of OMB’s professional staff is that it has improved the
analysis of proposed rules.
In February 2004 we
again solicited reform nominations, but with a clear focus on the manufacturing
sector of the U.S. economy. The manufacturing sector faces a relatively
large regulatory burden when compared to other sectors of the economy,
and thus the need to streamline burden on the manufacturing sector is
essential. As with the 2002 nominations, we requested nominations of guidance
documents and paperwork requirements as well as regulations. We also 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 response to this solicitation,
we have received 189 distinct reform nominations from 41 commentators.
We are in the process of evaluating these 189 nominations and intend to
publish a plan for agency evaluation of these suggestions later this year.
Looking back at our
experience over the last four years, we offer the following observations
for the Subcommittee's consideration. First, when OMB designates a reform
nomination as a "high priority candidate" for agency consideration,
the result may be a higher likelihood of agency action. Second, full funding
of the President’s request for OMB would enable us to continue to
make progress on regulatory reform. Third, bureaucratic incentives make
it difficult for agencies to engage in the review of existing rules when
they are focused on meeting obligations for new rules, often under statutory
or court deadlines. Finally, the total number of reform nominations from
the public should not be misinterpreted as the total number of meritorious
reforms. Not all suggestions from the public are well grounded in scientific,
economic and legal analysis.
Thank you very much
for the opportunity to participate today in this very important hearing.
Table 1: Status
of Reform Nominations
of Nominations considered
for Agency Actions*
of Agency Actions
2001, this column is the number of actions designated as high priority
by OMB. In 2002, this column is the number of nominations referred
to agencies for their consideration.