Government regulation: Where do we go from here? (1977) | ARCHIVES

Government regulation: Where do we go from here? (1977) | ARCHIVES



Announcer: From the nation's capital, the American
Enterprise Institute for Public Policy Research presents Public Policy Forums, a series of
programs featuring the nation's top authorities presenting their differing views on the vital
issues which confront us. Today's topic, "Government Regulation: Where
Do We Go from Here?" Mr. Hackes: One of the major promises made
by candidate Jimmy Carter in the 1976 political campaign had to do with reform of government
regulatory agencies to make them more responsive to the wants and needs of the people. President Jimmy Carter is finding that promise
tough to keep largely because it's hard to determine what regulations are best for both
the regulated industries and the public. Often within a single industry for example
there are bitterly opposing views from those who want less regulation and those who want
more. Often different segments of the public want
different regulations. If we can agree that some regulatory changes
are needed then how does a president or a congress decide which areas should be dealt
with first? Employee safety and health, consumer protection,
interstate transportation, environmental controls, public health? Is it realistic in fact to believe that government
regulation can be streamlined? Who's paying for government regulation? Do businesses absorb those costs or are they
passed along to the consumer? Welcome to another Public Policy Forum presented
by AEI, the American Enterprise Institute, a nonprofit, nonpartisan research and education
organization. Today's roundtable discussion is on the topic
"Government Regulation: Who Do We Go From Here?" Appearing on our panel are: William Proxmire, a Democrat, Senior Senator
from Wisconsin. Senator Proxmire is Chairman of the Senate,
Banking, Housing, and Urban Affairs Committee and a member of the Appropriations Committee. He holds two masters degrees from Harvard,
one in Business, the other in Public Administration. John Danforth, a Republican, serving his first
term in the Senate from Missouri. Senator Danforth serves on the Finance, Commerce,
and Governmental Affairs Committees. He is a former Attorney General of Missouri. Senator Danforth, who is an ordained Episcopal
minister, is also a lawyer. Dr. Harrison Wellford is the Executive Associate
Director of Reorganization and Management at the Office of Management and Budget. In this position, he has major responsibility
for regulatory reform efforts within the Carter Administration. In the early '70s, Dr. Wellford headed the
Center for the Study of Responsive Law in Washington and later became the top legislative
assistant for the late Senator Philip Hart of Michigan. Paul MacAvoy is an Economics professor at
Yale. As a member of President Ford's Council of
Economic Advisers, he was Co-chairman of the Ford Task Force on Regulatory Reform. Dr. MacAvoy, formerly a professor of Public
Policy at MIT, is Chairman of the Technical Advisory Committee of the AEI Center for the
study of government regulations and is an AEI adjunct scholar. John Charles Daly is former news corresponded
and commentator for both CBS News and ABC News. Mr. Daly headed the "Voice of America" during
the Johnson administration and is a former ABC Network Vice President. Now, here's Mr. Daly. Mr. Daly: This Public Policy Forum, part of
a series presented by the American Enterprise Institute, is concerned with Government Regulation:
Where do we go from here? Well, we might well start with where we've
been. For our purposes it all probably began back
in 1789. We then had a government agency established
to regulate the duties collected on imported goods. And in that same year, President Washington
established a new federal agency to regulate the payment of pension benefits to Revolutionary
War veterans. The acronym era may be said to have begun
in 1887, with the establishment of the Interstate Commerce Commission, the ICC. The Food and Drug Act in 1906 introduced regulation
to protect public health. The Great Depression in the 1930s produced
the CAB, the FCC, the Federal Maritime Commission, the FPC, the SEC, the FDIC, the NLRB, etc.,
etc. In the 1960s, regulation took a new turn and
sought primarily to pursue social objectives rather than to meet economic needs. Thus, were born EEOC, the Equal Employment
Opportunity Commission, OSHA, EPA, the CPSC, the Consumer Product Safety Commission, etc.,
etc. After 200 years of effort, we have created
a labyrinth of regulatory agencies touching every aspect of American life. Paradoxically, the record indicates that the
first major concern about the scope, complexity, and authority of the regulatory labyrinth
surfaced during its golden hours, the New Deal. President Franklin Roosevelt established the
President's Committee on Administrative Management, the Brownlow Committee, the report of which
concludes that the independent regulatory commissions constitute a serious and increasing
problem. They obstruct effective overall management
in the executive branch of the national government. They hinder coordination of policy and coordination
of administration. Two Hoover Commissions on the organization
of the executive branch under Presidents Truman and Eisenhower followed, and then President
Kennedy, prior to his inauguration even, commissioned James M. Landis to report on the regulatory
agencies. President Johnson established the Administrative
Conference of the United States in 1964 to reform the regulatory process, and President
Nixon established the President's Advisory Council on Executive Organization, the Ash
Council, in 1969. President Ford and the Congress in recent
years have moved on reform in several areas, and President Carter made reform of the regulatory
scene a major element even in his presidential campaign. Still, the way out of the regulatory seen
a major element even in his presidential campaign. Still, the way out of the regulatory labyrinth
eludes us, and our question is where do we go from here? Senator Proxmire, does the present Congress
consider government regulation a serious problem? And if so, do you think the problem is getting
sufficient attention? Mr. Proxmire: Well, John, I do. I certainly consider regulation a serious
problem, and that there are conflicting elements in the public and they're reflected in the
Congress that indicate the nature of that problem. Number one, I think that the Congress and
the public realize that one of the great improvements in our society in the last 10 year to 20 years
has been the deep concern about the environment and they had been reflected in constructive
government legislation to protect the environment. I think also a much deeper concern and action
to protect safety and health, and that's very constructive. But at the same time, you have a conflicting
view that there's just too much government. Not only are taxes too high, government too
big, but also government interfering too much in these very areas, environmental protection
and safety, and health. So, you have that kind of a conflict. Then also, I think people look to the government
and regulations to do something about the very serious burden of inflation. They feel that if you can handle regulation
in the proper way it can ease the great burden of rising prices. So you have those conflicting concerns by
the public and reflected in the Congress and you're gonna see action in the Congress I
think in this year and in coming years on that basis. Mr. Daly: Senator Danforth, can the present
regulatory structure be made to operate more effectively, or perhaps is a completely new
structure necessary? Mr. Danforth: Well, I wish I could say that
it would be enough just to tinker with the existing system and I do feel as a matter
of fact that combing through all of the existing regulations and trying to get rid of those
that are useless or unduly burdensome is always something that is worth doing. But I am beginning to feel that we need to
approach the problem on a more structural and systematic basis and look not just that
those regulations which are particularly harmful, damaging, but to try to figure out those areas
which are appropriate for regulation and those which are not and to start thinking in terms
of alternatives to the very specific kind of regulatory structure which we so often
have, particularly perhaps setting general goals of performance in various areas and
offering a system of rewards or penalties for meeting or failing to meet those goals
rather than to zero in on particular very detailed regulations and try to solve every
problem by simply putting out a new book of regulations. Mr. Daly: All right. Dr. Wellford, you headed President Carter's
transition team on government reorganization. What is the administration's approach to reform? Mr. Wellford: Well, I'd like to agree with
Senator Danforth that one of the most important things for us to do now is to ask the question,
what is the scope of appropriate federal intervention in the private sector? Therefore, are we going to emphasize increased
competition in the transportation area? But I should also point out that we're entering
really a new era of regulatory policy with this administration. The last decade has been characterized by
major legislation which has extended the reach of regulation into vast new areas. While the increased protection from the public,
from occupational hazards, from environmental hazards, from consumer products has brought
great benefits, we have to recognize that much of these new programs were introduced
in response to crises. They resulted in hasty legislation and hasty
regulation. And as a result, we have a system that in
the sheer size of the regulations affecting the public has grown enormously in the last
10 years, and a system where emphasis on goals, on regulatory goals, and a relative lack of
attention to management feasibility has resulted in delay, overlap, conflict between regulations,
and unnecessary burden on the private sector. So, in addition to a transportation deregulation
theme that I mentioned at the beginning, we're emphasizing very strongly the need to improve
the management of the entire regulatory process. Mr. Daly: All right. Professor MacAvoy, to begin to get to the
nuts and bolts of the issue, what in your judgment is the net impact of government regulation
on the overall economy? Mr. MacAvoy: Most of my colleagues may not
agree with this summary but it appears to me to date that the effect of regulation has
been to increase the prices that consumers pay for goods and services. Trucking rates are too high. I don't know how much too high. Airline rates may be $5 billion $6 billion
a year too high. Energy prices as a result of the regulations
of the Federal Energy Administration and the Power Commission may be $5 billion or $6 billion
too high. The FEA, until recently, required 600,000
reports to be submitted every year by companies that produce energy. That adds a $150 million or $200 million to
our household bills because of the cost of filling out these reports. In health and safety regulation the generalization
becomes much more difficult. It appears from the GNP accounts, gross national
product, that probably the environmental regulation, which comes from Senator Proxmire's concern
and my concern, does add a couple of points to the Consumer Price Index. The safety regulation probably not that much,
but the investment that has to be made in equipment to meet these requirements adds
finally to cost and then to prices of consumers. Economists seem to believe that this has begun,
finally, to affect the overall performance of the economy. We used to grow at something like 4% per year. It now looks like maybe a quarter of that,
maybe a percentage point or a little more than a percentage point, of that growth has
been sacrificed to regulatory activities. If you look out over a 10-year to 20-year
period that means that we will be significantly smaller than we would have been in the absence
of these regulations. It becomes very difficult to measure that
but it appears at least generally that the cost of these controls in that reduced growth
rate are not compensated for by benefits of a safer society or a more healthful environment
or even more regular airline or trucking service. Mr. Proxmire: But, Paul, the way we measure
a gross national product is very unsatisfactory. I remember Senator Fulbright always used to
be so frustrated with the gross national product. The more waste you have the more GNP you have
in some ways. You would agree I'm sure that the gross
national product doesn't measure a degree of necessarily a quality or of achievement
of any particular kind. It just adds up all of the goods and services,
some of which may be counterproductive. Mr. MacAvoy: Right. Mr. Proxmire: So, when you require a company
to build an environmental instrumentality at a cost of $15 million or $20 million that
is reflected as growth in the GNP, it seems to me that the answer to what you've got there
is to try to develop some kind of economic impact requirement for environmental action
so that we have some clear notion of the effect, the cost that the environmental protection
is going to give us. It may or may not be worthwhile. In many cases I think it would be, in other
cases it wouldn't be, but isn't this something we ought to have? Wouldn't that move us in the direction of
getting a greater quality at least in our GNP? Mr. MacAvoy: It would. You're asking for even more than that though,
Senator Proxmire, in that we should begin to measure the benefits that flow from these
health and safety regulatory activities. The first step in that is to look at changes
that have occurred in the physical dimensions of safety or environmental quality. For example, what has happened to accident
rates as a result of the Occupational Safety and Health Administration, our infamous OSHA? What has happened to particulate matter in
the atmosphere as a result of EPA enforcement? What has happened to the number of accidents
in the household as a result of CPSC, Consumer Product Safety Commission, activity? Those crude numbers, again, they're not any
better than the GNP accounts which you and I feel tyrannize us as they come from the
accountants. But those physical numbers show no significant
impact as a result of all this regulatory activity. The Council of Economic Advisers in 1975 by
creating the Great Recession of that year did more to reduce particulate matter in the
atmosphere than EPA in all its lifetime. We have not been effective in reducing whatever
it is we're trying to reduce. At the same time we've had a great deal of
investment because that ladder has to meet the OSHA standards or you have to have that
stacky [SP] mission device so we've got the worst of both worlds, equipment that does
very little that costs a great deal because that's what the administrator in that agency
says you have to have. Mr. Danforth: I think that really our goal
has been the wrong thing in a lot of these regulations. Our goal has not been the results that we
want to accomplish. Our goal instead has been the means by which
the regulators think the goal should be accomplished. So that instead of focusing on how many man-days
are lost in a particular industry as a result of accidents in the workplace, instead, we
were focusing on such matters as how big is a hole and when is a ceiling a floor and how
high should the fire extinguisher be from the floor and so on and so forth. What we have done is unleash an army of inspectors
who have moved through the country for the sake not of creating safer job sites but for
the sake of policing regulations which were believed by the regulators to create safer
job sites. And I think that the kind of structural change
that we need is to put less emphasis on the regulator's idea of what makes sense with
respect to say safety or pollution and so on and focus on the result we seek to achieve. If we seek to reduce the number of man-days
lost in a particular industry from X to X-Y, then it would seem to me that the way to go
about that would be to set that goal-oriented standard, and to provide rewards in the form
of say tax incentives for meeting that standard, penalties for not meeting that standard, and
leave it to the industry that's being regulated to make the determination as to how to accomplish
the goal, rather than to have the regulator set the means and then police the means. Mr. Daly: Dr. Wellford. Mr. Wellford: I think that the question of
how you measure the benefits of regulation is a fascinating question. I agree with Ray Marshall that the design
of the toilet seat is not fundamental to the health of the American worker, nor the number
of knotholes in a ladder. But I do think that carcinogenic vapors or
carcinogenic dust for example in the workplace is, at the same time, if the hazard is there,
and there's a latency say it's 20 years before cancer turns up in the exposed worker, how
are you going to measure that benefit and reduce cancer? Looking at it right now is very difficult. And I would say the same thing about air pollution,
I'd say the same thing about water pollution, and many other areas where we're talking about
long-term hazards with long latency periods in terms of the impact they have on the victims. Mr. Proxmire: I just wonder if it's that complicated. Let me pursue Jack Danforth's proposal, which
I think makes a lot of sense. And there is a practical example of how well
this has worked in the Ruhr River in Germany. That river is the most intensely used by industries
in the world. Every kind of polluter, just about, is on,
chemical companies, coal, steel, and so forth. And yet, it's, you can sail on it. You can swim in it. You can drink it. Now, why? Because they have put in exactly the kind
of incentive system that Jack proposes. It makes sense. They provide that the industries that are
on the river will have a tax reduction, or I should say will have to pay a tax depending
on the amount of pollution they put into the river. In other words, what they recognize is that
water is no longer a free good in this sense, and you have to pay for it. It's an economic good. And, Stanley, when I got a chance I want to
get on top of Harrison Wellford here on the banking regulation if you'd let me, John,
because this is something that I think the Carter administration should really get to
work on. When President Carter was running for office,
he campaigned on the basis of simplifying organization. He had talked about reducing the number of
agencies in Washington to 200 and so forth. Here in banking, we have an opportunity that
I think is just asking for the Carter solution. We have three different separate agencies
regulating banking, duplicating, wasting, their operations. We get opposition from the bureaucracy because
they would like to preserve their empire. The only way we're gonna get this through
is by having you, Mr. Wellford, and the Office of Management Budget come in and support us
on this. Mr. Wellford: Well, I'm delighted to be able
to discuss this issue with my Democratic colleague. I thought it was two against two. Mr. Proxmire: I'm just trying to help Jimmy
do a good job, you know? Mr. Wellford: I don't doubt that for a minute. Mr. Proxmire: Maybe for an hour but not for
a minute. Mr. Wellford: We have put a lot of push behind
the airline deregulation bill this year. We intend to address proposals for increasing
competition in the trucking area next. When we have accomplished those two enterprises,
with your help, we will be turning to other areas, including banking, I suspect. But really there is a question of what should
be at the top of our agenda and I really think that it's hard to argue that anything is more
important right now than addressing the transportation area. Mr. Proxmire: Well, just one more. We're not asking that you say this is number
one on your priority agenda. All we say is that we want the administration
to say they favor it. Now, they oppose it. We have Secretary Blumenthal who says he doesn't
want to do that. Of course, the controller of the currency
which is one of the agencies under his jurisdiction would cut down on his empire, but what we
want is to have the President say that he favors the bill. Mr. Daly: Professor MacAvoy? Mr. MacAvoy: A cry from the right for diversity,
Senator. A great deal of reform has already taken place
in regulation of financial institutions, banks, insurance companies, in particular, stockbrokers,
as a result of there being state agencies, three or four national agencies, some of whom,
whether the word is lax or inventive or enterprising, have tried new ways of providing services
to individual consumers. In Mr. Daly's Massachusetts, we have NOW accounts
which will allow us to earn interest on checking deposits. We have not failed. The banks have not failed at an extraordinary
rate. Banks in Massachusetts fail now and again
but the effect on individuals there has been to distribute income substantially in favor
of consumers. That would never have happened if the Federal
Reserve were setting standards for interest rates on checking deposits. Mr. Proxmire: Well, you just yielded on that
point. Bless your heart. I'm so glad you brought that up. Sure, we have 15 different banking commissions. Mr. MacAvoy: This is not a conspiracy. Mr. Proxmire: Oh, no. You've got state regulators in the banking
area but you shouldn't have three separate federal regulators in addition to the 50 state
regulators all trying to do the same thing in the same industry. It's the only industry that has that. And I submit that regulation of our financial
institutions lags far behind regulation in the other areas where they have a unified
regulator. Mr. MacAvoy: MacAvoy's Massachusetts law. Competition among regulators drives out excess
regulation. Mr. Proxmire: If you buy that you'll buy anything. Mr. Daly: Senator? Mr. Danforth: I will say this though. I think that Paul has made a good point about
diversity, and I share his point of view. Mr. Proxmire: Do you want three Federal Power
Commissions too? Mr. Danforth: No. I mean on the relationship between state government
and… Mr. Proxmire: Oh, fine. Mr. Danforth: …the federal governments. And, for example, the Community Development
program, I had a meeting not long ago with mayors from a number of communities in St.
Louis County in my state. And they told me that the Community Development
program has gone sour, that they have become inundated with regulations. What was originally thought as being a block
grant program which was to permit more diversity, more decisions being made out their throughout
the country, that somehow has become perverted. And as I understand it, the position of Secretary
Harris has been that we really don't want all those decisions being made out there. We want to put more strings or, and the word
that is now current in the federal bureaucracy, we want to target the way in which federal
funds are spent by the rest of the country. So in the name of targeting we've developed
more forums. We've developed more restrictions. We've developed more regulation. And maybe the whole problem of regulation,
or at least a good part of it, is the pretentiousness that we in Washington have, the notion that
somehow this is the font of all wisdom, and that if only we can make the decisions, we
will make the right decisions. And if we allow somebody to make the decision
out in the marketplace as to how to make his job or his product safer or how to pollute
less, somehow they're gonna foul it up, and therefore, we have to aggregate this responsibility
to ourselves. And I really believe that that is kind of
the philosophical problem that underlies this whole problem. Mr. Proxmire: Oh, now, come on, Jack. What you're talking about there is federal
money. Community Development money doesn't come from
the states. It comes from the federal government. If the federal government is gonna put up
the money then I think we have a duty to the taxpayers to see that it's spent the way it
ought to be spent. So what Secretary Harris has done which is
the right thing is saying, "As long as it's federal money, folks, then you should spend
that federal money for the purpose the law intends for a low-income people and we should
insist that it be spent that way." And I think she's absolutely dead right and
I'm gonna do all I can to support her. I hope you do too. Mr. Danforth: It just seems to me that the
real question is who's making the decisions in this country and we have used the leverage
power of the federal dollar to say to local communities, to say to state governments,
to say to universities such as Yale all over this country, you know, that, "Okay, we've
got all wisdom here in Washington and we've also got the buck," and particularly with
matching fund requirements to leverage the decision making authority out there in the
country I think really has twisted something that's been very important to the tradition
of our country. Mr. Proxmire: Well, the best answer, of course,
is to just cut out spending the money. If you want to join me in that, I'll do that
with you too. Mr. Daly: Dr. Wellford, you wanted to say
something. Mr. Wellford: We have just completed a review
of all of the planning requirements that the federal government requires when it makes
an economic assistance program available to state and local government. And we have reports…every agency that imposes
a planning requirement to go back and ask a question. Is it really necessary? Can you standardize it? Is it in conflict with another planning requirement
or whatever? And all the results are not in, but we're
going to bring about I think a substantial reduction in that paperwork required for simply
taking part in federal programs. You know, there's a whole industry now of
consultants whose stock in trade is to help these state and local jurisdictions fill out
these forms so they can get federal money. But there's another aspect to the problem
which becomes clear. First, an awful lot of these planning requirements
are mandated by Congress. We'd have to go back to Congress to change
them. Secondly, the whole economic assistance area,
the $50 billion of programs that we're spending on economic assistance in urban areas, for
example, is honeycombed with single-purpose programs without any real coherence between
them, without any strategy to direct them particularly. And I think we've got to address a more fundamental
question. You know, what purpose are all these programs
serving? What is the target we're trying to hit? And, what kind of federal organization is
best suited to pursue that target? Mr. Daly: May I intervene here? I think we would all agree that the last formal
comprehensive review of the needs in the regulatory area was made by the Domestic Council Review
Group that President Ford established in 1974, which put its report in January of 1977. And in that report, if I may quote from it
briefly, it says, "Conventional wisdom held that most of the holes, that most of the shortcomings,
in regulation result from unqualified personnel, cumbersome organizational structure, or inefficient
operating procedures. The council agreed that reforms are needed
in these management areas, but it believes that the basic trouble lies deeper. It believes, one, that some regulation just
doesn't make sense," and it gave as the example the CAB, "That in areas where federal intervention
is needed, it has been ineffective or inefficient because the agencies have not been using appropriate
tools." And here they gave as one example, OSHA, "And
three, that far greater efforts are needed to determine the social and economic effects
of regulation." How do you all feel about that? Do you think [crosstalk 00:31:16]? Mr. Proxmire: I think there's a great deal
to that. It seems to me that the answer is to recognize
in my view that there are some regulatory agencies that can be abolished. I favored for a long time just abolishing
the Interstate Commerce Commission. I think that President Ford took a very constructive
step in the right direction by very much reducing their tendency to do precisely the opposite
of what it was created to do in 1887 when it was created to hold down the railroad rates
for the farmers. These railroads, of course, were the only
method of transportation. Now, you have enormous potential competition
in transportation, if the ICC holds the rates up. So I think that there are some of these that
does go deeper as you say, John. I think there are some of these agencies that
should be abolished. I think that there are others where you can
rely primarily on disclosure as your principal means of regulation. What, after all, is the most effective regulatory
body we have in Washington? In my view, it is the Securities and Exchange
Commission. I think they do a superb job. And they certainly get into plenty of controversies. Today's paper was filled, as almost every
day's paper is, of attacks on the SEC for what they've done, but I think almost everybody
approves the vigorous, and honest, and effective way they operate. But what they're doing is disclosure. They base their operations on disclosure. The other thing I think we should rely on
is more antitrust action and rely more on competition as the means of the principal
regulatory element in our society. Mr. Danforth: I'd just like to add I completely
agree with the emphasis on antitrust. I think that that is one very promising substitute
for all this regulation, to allow a competitive marketplace to regulate itself. I'd also like to point out that really the
great opponent of deregulation are the industries which are regulated, that they really don't
want the competition. I mean, for example, on the airline bill,
the Commerce Committee hearing room was just filled with representatives of the airlines
day after day after day. They were opposed to deregulation. They wanted the system. Mr. Daly: It's not unanimous, though. Mr. Danforth: No, it's not unanimous, but
there were certainly a lot of them. The same is gonna be true with trucking in
my opinion. I saw it when I was Attorney General of Missouri
in the state government. We had, for example, a Board of Embalmers. When you think of it, what is the public interest
in regulating embalming? I mean, as far as the public is concerned,
what difference does it make? It's too late. But the embalmers wanted it. That was the point because it was a way to
limit the competition, to keep people out of the industry. Mr. Proxmire: That's an excellent point. The fact that the people who are being regulated
are the ones who really want that. Mr. MacAvov: We agree widely on what should
be done, Senator Proxmire, but there is real confusion among economists at least about
how to get there from here. There's a professor at South Carolina who
took your suggestion of abolishing the ICC seriously and looked into the possibility
of tearing the building down and having the people in the civil service who are in the
ICC put out in the street and then salting the Earth so nothing would grow there ever
again and found that he couldn't get an environmental impact statement by doing that. But more seriously, the question is how do
you get from here to there through Congress? The ICC has been a subject of trenchant criticism
by President Kennedy, President Johnson, President Nixon, and President Ford, and now with Dr.
Wellford's help, Mr. Carter is approaching them directly as well. The approach is to take it to a subcommittee
of the Senate Commerce Committee where the individuals concerned with this wrote the
original bill, perhaps four or five of the senators who were there in 1887, when the
Act to Regulate Commerce was passed do not take kindly to the notion that the act to
regulate commerce is not any longer exactly right. They take testimony from those in the industry
who say, "There will be chaos, disruption. The Republic will fall if you pass this bill." And then the economist or even Dr. Wellford
comes in from the administration. And the response to the proposal for reform
is, "You've never run a railroad or a truck or an airline and you have this notion there
is $6 billion of cost out there. Show us there will be no chaos in the market
as a result of this reform." The proposition that those who reform must
bear the burden of proving what is going to happen every day between now and then is impossible
to bear and we do not get the reform. Mr. Proxmire: That's right. Mr. MacAvoy: How can we change Congress, Senator,
to put the burden of proof on those who are now advantaged by the special interest regulation? Mr. Proxmire: Well, you're absolutely… That's why it's so difficult to change this. It's so difficult to reduce or modify regulation. Mr. MacAvoy: You guys won't change. Mr. Proxmire: Well, I think what you have
to do is to grasp the opportunity. That's why banking is such a marvelous opportunity. Mr. Daly: Now, let me bring this back to something
that I wonder if you think is critical and very important. And the Domestic Council Review Group in its
report said, "In the regulatory area, almost without exception, policy has been formulated
in unnecessary ignorance." Now, do you think that that is quite reasonable? Senator Danforth? Mr. Danforth: Yeah, I think you're absolutely
right. I've only been here a year, and it's just
amazing to me how much is done on the back of envelopes. You know, this sounds reasonable. And, I mean, the public demands, for example,
safe jobs. The public demands clean air, clean water. And when a bill comes before Congress, people
in Congress are politicians and they don't want to position themselves as being against
safety on the job, so they vote for the bill without really understanding what the effects
of the legislation are. And I think that that's a very, very valuable
point to make. We are not a bunch of wizards in Washington. Mr. Daly: Did do you want to say a word, Dr.
Wellford? Mr. Wellford: We recently issued a proposed
executive order, you may have seen it, which attempts to get at the problem that you've
mentioned. The basic purpose of the executive order is
to bring major regulatory options as proposals to public attention, for that matter to government
attention, much earlier in the process. Traditionally, the first time the public learns
about a regulatory initiative or indeed the first time that one regulatory agency learns
about an initiative by another is when a notice of proposed rule-making is put in the Federal
Register. We have proposed that a regulatory agenda
be created much earlier in the process before a final decision has been made even to announce
it in the Federal Register. And this is to encourage a much more rigorous
exploration of alternatives to a particular regulatory action and to see whether or not,
in fact, the agency has chosen the most effective, least burdensome way of getting a particular
job done. And you all tried something like that in the
Ford administration where you had an economic analysis of regulations. But the problem I think with your process
was that it came awfully late in the game. We're trying to have this consideration of
alternatives done earlier, so that there can be a much fuller debate. Mr. MacAvoy: The problem with our process,
Harrison, is that for reasons I can't conceive no agency ever wrote an economic impact statement
that shows the economic impact of their rule-making was adverse. Mt. Daly: Right. Mr. MacAvoy: That may have been coincidence
but that never happened here. Mr. Daly: All right. I think probably it's time now to let our
distinguished friends in the audience and there are good friends in the audience have
an opportunity. Time to open the question and answer session. Mr. Hakes: Federal regulatory reform is not
something new. Other presidents and other congresses have
tackled the problem with varying degrees of success. Where did these efforts go wrong? Did they try to do too much? What happened to the regulatory agencies in
the process? Do the agencies serve the public or have they
been captured by the industries they regulate? Now, to challenge our panel members let's
get the views of the experts in our audience. Mr. Daly: All right. May I have the first question, please? Ms. Franklin: I'm Barbara Franklin and I'm
a member of the Consumer Product Safety Commission. I'd like to pursue this cost-benefit idea
a bit further. We still wrestle with the question of how
do you value a human life, a life saved by one of our regulations? My question to the panel is what you think
we should be considering on the benefit side and how you would go about making some of
those quantitative judgments like how do you value a human life? Mr. Proxmire: Can I just start off on that
because I'm very interested in the Consumer Product Safety Commission. They come before the subcommittee of the Appropriations
Committee which I'm chairman, and we've been concerned with the operations of the Consumer
Product Safety Commission. I think it's been greatly improved in recent
years, particularly in recent months. But the Consumer Product Safety Commission
has a long way to go because it didn't establish those priorities in the beginning. And it seems to me that the basis should be
the number of lives that are now lost that might be saved if you improve the product
involved, the number of serious injuries that might be saved if you improve the product
involved. A classic example it seems to me is that one
of the first things they picked out were swimming pool slides. They found out in the swimming pool slides
after they had spent a considerable time designing standards for them that the principal people
who are injured were not children but adults. And they were injured because they would slide
into swimming pools when there was no water in them and when they had been imbibing in
spirits rather freely. Mr. Danforth: I think that the idea should
be to focus on the ultimate objective, namely saving lives, saving injury, and that for
the purpose of developing safe products, a determination should be made as to what kind
of reward or what kind of penalty is necessary to induce that industry to attain a certain
measure of safety. I'm afraid that that is not the kind of determination
that's typically being made because instead of making a decision as to what's necessary
to save lives or what's necessary to make safer jobs, I think that really the emphasis
has been what kind of regulations make sense to the regulators and what can we do to enforce
those regulations for their own sake? And so that the cost-benefit analysis is not
an analysis made on the ultimate objective, but it's an analysis that's made on the regulation
itself. Mr. Daly: Professor MacAvoy? Mr. MacAvoy: The senator is on a line of inquiry
that economists, technicians, very deeply appreciate. And that is if you can avoid having to make
an artificial estimate of the value of a human life, put it in the computer and you get garbage
out because it depends upon 12 assumptions, by all means, do so. And in many of these instances, the question
is not whether some policy is necessary or justifiable, but if there are 12 different
ways of doing that lifesaving exercise, which costs the least? That question has come up for example with
respect to airbags, and safety belts, and other devices in automobiles. And you cannot ask what is the value of the
human life saved by the airbag, but can you reduce accidents by the same number by going
to some other method besides the airbag without imposing the air bag's $300-per-car cost on
consumers. Mr. Daly: Next question, please? Mr. Whiting: My name is Basil Whiting and
I'm the Deputy Assistant Secretary of that infamous agency, OSHA. It's troubled, but workers feel it could and
should be an important agency. The question has to do with what I feel troubled
about in terms of a facile analogy that some cite between environmental regulation and
occupational safety and health regulation or health regulation in general. And that is the analogy between a pollution
tax and a so-called injury tax. And I'd like to ask the panel, especially
Professor MacAvoy, what he feels to be the morality and efficiency of an injury tax because
my experience suggests that the market of ideas in relation to an injury tax and its
impact is quite flawed. Mr. Daly: Professor MacAvoy. Mr. MacAvoy: We have an injury tax in the
form of workers' compensation, one of the most comprehensive insurance systems in the
country whereby those who are injured in a factory accident are provided with funds to
in some way make up for the lost wages or income and for the cost of the accident. And these funds eventually derive from payments
that have to be made into an insurance system. The insurance system is faulty in that the
amount of the payments that a particular factory makes is not related to its accident rate
in a number of industries. If it were related to the accident rate, we
would have incentives built into the management scheme in that factory to reduce accidents. Those incentives were built into the Voluntary
Industrial Health Association standards, which became the OSHA standards. That is the way injuries are prevented in
the factories, as far as I know it, are that an education process goes on whereby workers
and shop stewards and foremen are strongly educated in the process of accident prevention. Those who are accident-prone are removed from
high-accident operations so as to keep the number down as low as seems technically feasible,
not technically feasible, economically feasible. Now, if insurance schemes penalize this process
then they will be kept down even more. The first step in reform is to make those
insurance schemes quite specific with respect to each factory. When that occurs then we've got room to ask
whether some of these mandatory physical standards which were, as the gentleman well-described,
voluntary and part of the education process. You don't put a ladder down the stairwell
or you don't leave third-floor exits open and so forth. Those standards might then come into question
on a case-by-case approach. I foresee in some instances that there should
be outright prohibition of the existence of certain kinds of hazards in factories. But I see on a case-by-case approach that
if you correct the insurance scheme to penalize high accident rates, then OSHA as a process
comes under very basic question. We may not need those 20,000 standards anymore
to anywhere near that magnitude. Mr. Daly: The next question, please? Yes, sir? Mr. Chapman: My name is Dudley Chapman. I'm a Washington lawyer, formerly a member
of the Domestic Council Review Group. I'd like to ask any member of the panel to
respond to a question that I find very troubling in terms of where we're going in regulatory
reform. I'm referring to some things that came up
during the first part of the session, specifically the one area in which regulatory reform has
so far scored something of a success in the securities industry, the second having to
do with the ICC in which it has so far gotten nowhere. The conflict that I see is between the direction
of regulatory reform and antitrust which is another value that was espoused by the panel
earlier. If one is to believe what one reads in the
newspapers about the effects of regulatory reform in the securities industry, one and
certainly not only of the principal results has been a almost massive move toward very
heavy concentration in that industry. Concentration is, of course, a major bugbear
of antitrust, and, of course, I'm aware that the Antitrust Division was a major champion
of this particular reform. The second illusion was to the fanciful idea
of abolishing the ICC. And as Senator Proxmire pointed out one of
the major objectives to that legislation was to bring down railroad rates to farmers, but
that was not the only one. A major issue of that time comparable in its
magnitude to Watergate in ours was the Standard Oil Company. The path to the successful monopoly that John
D. Rockefeller built was his ability to negotiate more favorable rate reductions from the railroads
than his competitors were able to do. The essence of my question is in moving willy-nilly
to dismantle the government's regulatory process, are we going to recreate the same crisis we
had in the 19th Century? Mr. Daly: Who would like to start on that
one? Mr. Proxmire: All right. Well, he mentioned my name so I'll begin on
it. I think as far as the SEC is concerned, when
the fixed commission rates for brokers was abolished and competitive rates were established,
it was very clear that there would be a consolidation of brokerage firms. We may move toward only 18 or 20 or maybe
even fewer brokerage firms in the near future. There would be a considerable concentration. Now, does that mean weaker competition or
stronger competition? Obviously, you had no competition whatsoever
as far rates were concerned before because the rates were fixed. They were established. I think you're getting greater efficiency
in the brokerage industry. I think that the investors are getting a little
better break because the brokerage cost is being reduced. As far as the ICC is concerned, my point was
that we've had a transformation in technology is an understatement since 1887, especially
transportation technology. We've got a highway system now and a trucking
system that transports a very, very large proportion of all of our freight. Perhaps any abolition of the ICC in a short
time would be impossible and probably a very serious mistake. It would have to be phased out. It would have to be gradual. That's what President Ford proposed. But at any rate, I think it's important to
do what we can to provide a real competition among those literally thousands of individual
separate firms that are available to compete in trucking. Mr. Daly: Senator? Mr. Danforth: Well, I think it's important
to say that I don't know of anybody who is suggesting a breakneck speed move toward deregulation. A lot of industries have been created on the
basis that we're going to have a controlled kind of a system. And therefore, an airline deregulation, in
fact, if this bill that's now before the Congress is passed, it's not going to be a change that's
accomplished with breakneck speed. It's going to be accomplished over a period
of time so that hopefully the businesses that are involved in it will have some time to
adjust to the new system. Mr. Daly: Professor MacAvoy? Mr. MacAvoy: It's important to add to that
that we should try to forecast well and accurately and thoroughly what's likely to occur in the
deregulation process to the structure of the newly less-regulated or unregulated industry. I believe that economist and lawyers working
on these questions work very hard on these predictions, that they're subject to terrible
criticism from the industry for their lack of realism and accuracy, but that in each
case the issue has been do we get an effectively competitive market and in each case that I
know of where the proposals have been made around this table, the answer seems to be
yes so far, of an effectively competitive market from reform of regulation. We don't get more monopoly. Mr. Daly: Dr. Wellford? Mr. Wellford: I think you're dead right that
the antitrusters and the regulators need to be, or the deregulators, as the case may be,
need to be to talking to each other more. One example which does not go to the point
that you made and I think is important the mention of the subject is the fact that in
many regulatory initiatives that we're taken, the fact that we developed standards for the
larger companies and imposed them on the smaller ones has resulted in concentration that really
isn't I think economically healthy in the long run. The meat inspection there is a classic example. We developed sanitation standards and requirements
for very expensive technology that may be appropriate, that is as far as the technology
is concerned for Armour or Swift, but really isn't appropriate for the small locker plant
in a small town. Mr. Daly: Next question, please? Mr. Freer: My name is Duane Freer. I'm with Federal Aviation Administration. I'd like to suggest that within the federal
bureaucracy there's a lot of federal bureaucrats that feel they too are being swamped with
legislation. Too many laws, too much legislation, perhaps
too much patchwork, too much band-aid type legislation in an almost frantic pace coming
from the Hill. I would like to know the response of the two
senators particularly to the suggestion that's been made recently by several people that
the Congress sit fewer days and consider less legislation. Mr. Daly: Do you want to start that? Who wants to start? Do you want to start it? Mr. Proxmire: I think many members of Congress
would like that and certainly many wives of members of the Congress and children would
like it because the Congress has been sitting more and more days and taking more and more
time, but I think the difficult fact is that we just have a bigger, more complicated society. Look how enormously the executive branch has
grown, and our country has grown, and the very great complexities of our economic system
are constantly increasing, technology coming on with a rush. We have a half-trillion dollar budget coming
up and it's going to be vigorous as time goes on. There's no way we can stop that. We would like to. We hope we can hold back the rate of increase. But under those circumstances I think that
Congress just has to recognize we're gonna have to do more. We're gonna have to have, unfortunately, larger
staffs. I just hope that we can hold down the pace
of the increase somewhat. I think you've focused on a very important
problem. I hope we can begin to restrain ourselves
in that respect, but I don't have any hope unfortunately that we can live a simpler life
in the future. It's likely to be more complicated. Mr. Daly: Senator Danforth? Mr. Danforth: I have no doubt at all that
Congress is, as was described in one newspaper article a few years ago, the bloated branch
of the federal government. I think that it is overstaffed. I think that it meets for too much of the
year. I think that it is busy doing more to the
American people than it is doing for the American people. I think that staff members are busily trying
to find what one person called BAFOs in order to advance their congressman or their senator
into some new area that nobody has ever even thought of before. I think we spend too much time putting out
press releases about new legislative initiatives. We've concocted in far too little time overseeing
what is going on and how the laws that we have passed are working, and I think you're
absolutely right in the implications of what you've asked. Mr. Daly: This concludes another public policy
forum, presented by the American Enterprise Institute for Public Policy Research. Mr. Hackes: This public policy forum on regulatory
reform has brought to you the views of four experts. It was presented by AEI, the American Enterprise
Institute. It is the aim of AEI to clarify issues of
the day by presenting many viewpoints in the hope that by so doing those who wish to learn
about the decision-making process will benefit from such a free exchange of informed and
enlightened opinion. I'm Peter Hackes in Washington. Announcer: This public policy forum series is created
and supplied to this station as a public service by the American Enterprise Institute, Washington,
DC. For a transcript of this program send $3.75
to the American Enterprise Institute, 1150 17th Street Northwest, Washington, DC 20036.

Leave a Reply

Your email address will not be published. Required fields are marked *