Written Testimony of
Richard A. Williams, Ph.D., Director
Regulatory Studies and Government Accountability
Mercatus Center at George Mason University

Submitted to the
U.S. House of Representatives
Committee on the Judiciary
Subcommittee on Commercial and Administrative Law
July 27, 2010

Mr. Chairman and Members of the Committee:

Thank you for the invitation to testify today on federal rulemaking and the regulatory process. I am an economist and the Director for the Regulatory Studies Program and the Government Accountability Project at the Mercatus Center, a 501(c)(3) research, educational, and outreach organization affiliated with George Mason University.¹ For over three decades, I have been involved with the federal regulatory process at multiple levels. Previously, I worked as the Director of Social Sciences for the Center for Food Safety and Applied Nutrition in the Food and Drug Administration (FDA). In that capacity I worked on regulations for 27 years at FDA with the exception of a three month detail in the Office of Information and Regulatory Affairs (OIRA). I also served for three years in the Army and had a tour of duty in Vietnam.

My testimony focuses on the essential role that effective checks and balances play in the pursuit of high-quality, effective and economically efficient regulations. James Madison in Federalist No. 51 said, "If men were angels, no government would be necessary...you must first enable government to control the governed; and in the next place oblige it to control itself." Absent regulators being angels, it is imperative that we apply effective checks and balances to regulatory agencies.

U.S. government agencies implemented the first federal regulations nearly 140 years ago. Since then, regulations have become a large part of how the federal government functions. Today, according to Regulations.gov, we are implementing nearly 8,000 regulations per year at a cost that may exceed $1 trillion.² With so many regulations under development or being implemented, who is exercising oversight to assess their quality and effectiveness? With the courts giving deference to agencies in their interpretations of federal statutes and Congress never exercising its authority to review and overturn rules, that leaves the small Office of Information and Regulatory Affairs (OIRA) as the sole bulwark for independent regulatory oversight. Yet, OIRA's recent record indicates that it may not be fulfilling its critical duties. OIRA's website shows that they are spending much less time reviewing very expensive rules and, under the current administration, the office has not returned a single proposed rule to its authorizing agency.

So why should we be concerned about regulatory checks and balances? We should be concerned primarily because they have a direct impact on our nation's economy and international competitiveness. Current news stories report that businesses are afraid to invest in new enterprises in the United States because of uncertainty about new taxes and regulations, including regulations related to greenhouse gas emissions, health care, and financial markets.³ Adding to the uncertainty is OIRA's apparently weak role in ensuring that the agencies thoroughly analyze regulatory policies and pay proper attention to benefits, costs, and unintended consequences. This uncertainty forces people to reconsider investment decisions, including whether they should invest in the United States or move their capital abroad.

Our research shows why weak checks and balances lead to dangerous trends in regulation that deter economic efficiency and growth. We find that agencies do an uneven and overall mediocre job in preparing regulatory impact analyses (RIAs), which are vital to understanding the likely economic effects of rules. Agencies clearly need to improve the quality and consistent use of these analyses.

In terms of regulatory reform, the Obama Administration has announced its intent to improve analysis and procedures by: (a) humanizing analysis, (b) using rigorous science, and (c) advancing open and transparent government, particularly "democratizing data." My testimony examines how the following key factors will affect the potential success of these proposals:

• What systemic problem/risk does this rule attempt to address?
• What are all of the relevant ways in which it might be solved (including a determination of whether people are likely to solve the problem without regulation in the near future)?
• For each potential solution, what is the actual mechanism for solving the problem and what is the proof it will be effective?
• How are people and institutions likely to respond to various legal regulatory options?
• What is the cost of each option?
• What might happen that is not part of the rule but is an unintended effect, i.e., a risk/risk issue?

Finally, I outline how OIRA can assist federal agencies in improving the quality, effectiveness, and efficiency of their regulatory regimes.

ENDNOTES

1. This testimony reflects only the views of its author and does not represent an official position of George Mason University.

2. Crain, Mark W., "The Impact of Regulatory Costs on Small Firms," for SBA Office of Advocacy, September 2005.

3. http://www.washingtonpost.com/wp-dyn/content/article/2010/07/14/AR2010071405960.html.