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The bills that Senator Nunn and I have introduced are first steps, and yet at one time they were thought to be revolutionary, and yet today we find that they have substantial support.
I can report to you today, Senator, that this bill is now in the process of markup by a House committee, and I feel that within the next few months this legislation will be acted on by the House of Representatives, and then I trust under your leadership, it will be passed by the Senate.
I am convinced more than ever, that this is an idea whose time has come, and that the American people expect us to get on with it.
Last October, a House Judiciary Subcommittee scheduled 3 days of hearings on H.R. 3658. The overwhelming desire of my colleagues and interested individuals and groups to participate in these hearings necessitated 4 additional days. Last week, this subcommittee considered certain changes to H.R. 3658 and I anticipate the subcommittee will report a modified version of my bill to the full Judiciary Committee. I am hopeful that the committee will act on this legislation in a month or so.
As the size and reach of Federal bureaucracy has grown, the need to reexamine its force and power has come upon us. Curbs on "administrative legislation”, which may not have been needed in years gone by, may be needed today. We have too many examples of administrative excess and zeal, going far beyond any congressional intent. Congress now has the responsibility of facing up to a reexamination of congressional control over the administrative process.
Administrative rules and regulations have the force of law equal to an act of Congress. Should not we, as elected legislators, recognize our responsibility to the American people by retaining control over the laws passed by an unelected bureaucracy? Our Founding Fathers recognized a similar situation and addressed it in the Declaration of Independence 200 years ago:“[King George] has erected a multitude of new offices, and sent hither swarms of officers to harass our people and eat out their substance."
Senator NUNN. Thank you very much, Mr. Levitas.
Senator Nunn. At this point we will enter the prepared statement of Congressman Dawson Mathis as read.
PREPARED STATEMENT OF CONGRESSMAN DAWSON MATHIS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA
Mr. Chairman, I appreciate the opportunity your Subcommittee has given me to go on record in support of your bill, S. 2716.
The bureaucratic agencies in our federal government have grown over the past years to the point where today they consider themselves, in fact, the fourth branch of government and at times they act as though they are more than equal to the other three branches. I feel the overzealous and offtimes incompetent bureaucrats who, more often than not, take the intent of Congress and over regulate and idiotically over complicate the legislation passed by Congress and their agencies must be brought back under the authority of Congress in the rule making process to insure the intent of Congress is adhered to. I believe, Mr. Chairman, that your bill, S. 2716, would be a much needed step in the direction of insuring that federal regulations are in keeping with the intent of Congress as expressed in the statutes which authorize them. I also believe that passage of the bill, S. 2716, would alleviate the necessity of a large number of bills introduced in Congress each year which are designed to correct a previously passed statute because Congress at present lacks the authority to disapprove proposed agency regulations.
Mr. Chairman, it is past time for Congress to regain their authority over the bureaucratic regulatory agencies in order to insure that federal regulations are wise and in keeping with the intent of Congress. Possibly more important than this is making the federal process more responsive to frustrated and ofttimes alienated citizenry by giving them a real and viable course in bringing unwise and unnecessary regulations to the attention of their representatives. Mr. Chairman, it is easy to understand their complaints when we look at some of the regulations which have been put into effect or proposed.
The need is great to correct this monumental problem and return to the principles upon which our nation was founded and I can think of no better time than this our bicentennial year. Mr. Chairman, you and the Subcommittee on Oversight Procedures of the Senate Government Operations Committee are to be commended for undertaking the task of bringing sanity and responsiveness back to our governmental process. Thank you.
Our first witness is a distinguished economist from the University of Georgia, Professor James L. Green.
Many of you have probably read several of the articles that Professor Green has written in our papers in Atlanta and throughout the State.
I am one of his great admirers. Professor Green, if you will, take a seat here, and proceed in whatever fashion you deem advisable.
TESTIMONY OF JAMES L. GREEN, PROFESSOR OF ECONOMICS,
UNIVERSITY OF GEORGIA, ATHENS, GA.
Professor GREEN. Thank you, Senator Nunn.
Senator NUNN. We have asked Professor Green to address himself to the economic impact of the regulations and rules that we are discussing.
Professor GREEN. I have a cartoon which I will pass on for the record, if you would like.
It shows two Senators obviously in a bar, perhaps a bar in the House, and they say this, “what we need is a strong authoritarian Government, with the courage to bring in compulsory laissez faire."
It is a very good observation.
I also point out that in the February 10 Wall Street Journal, there are three articles on the editorial page, having to do with this subject of Government regulation of business. In the banking industry, where loans were made, we have a regulator standing by each trust officer making loans, to keep the loans shall we say sound. The first article is entitled “Bored by the Bank Flap.” 1
The second one, entitled "The Captains of Video," ' has to do with a development between Government agencies, where the Justice Department is taking one side of the case, and the FCC the other side of the case.
The third one, entitled "Dreaming the Impossible Dream," : is the matter of the impact of lawyers. If the lawyers, like doctors, went on strike then, with no lawyers, you would have a very sound economy.
I have entitled my presentation paper "Perspectives on Government Regulation of Business: Impacts on the Economic System,” as a means of establishing the perspective for the entire day, I hope.
Now, our first requirement is to put the problem of Government regulation of economic affairs in perspective. What is it that we are really looking at in regulatory matters? What is the problem? Can it be defined? Is there a rational, logical solution?
i See p. 13. ! See p. 14. 3 See p. 14.
Since we must start somewhere, let's start with the Federalist Papers. The monetary system of the time, the Whiskey Rebellion, taxation without representation, trade, and economic development were problems of that day as they remain today. Since that time the debate over a free economy versus a regulated economy has provided a continuing dialog. The debate has never ended.
In this, our bicentennial year, it is important that we recognize that free, democratic political and social institutions are inseparably tied to free enterprise-oriented economics with economic power decentralized in private hands. These two aspects of an economic ssytem do not go together under authoritarian political control anywhere in this world of ours today. And further, an authoritarian political and social system cannot be superimposed upon a functioning enterprise economic system without destroying that system. That is our trend today.
By and large through the years the free enterprise system proved itself by providing tens of thousands of products for a consuming public and by providing tens of millions of jobs for Americans giving them record high incomes and the highest standard of living ever experienced by men anywhere. This was done without State planning, without a substitution of governmental judgment for the multiple judgments of millions of Americans in the marketplace. The market system preserved individual freedom of choice in how and where an individual earns his income and how and where he spends it.
The death knell of the free enterprise system was sounded in the deep depression of the 1930's when the market system failed to cope with massive unemployment in an increasingly interdependent economy. To meet the needs of the time, the Keynesian economic revolution propounded the proposition that Government action was required for economic stability and growth. Only through State intervention could the capitalistic system attain and maintain a high level of employment. In effect, individual self-interest as the sole motivator of the economic system would no longer suffice. Keynes added a principle of "collective self-interest” as a requisite to keep the economy in balance.
The Congress of the United States articulated this principle as a national goal in the Employment Act of 1946. The act mandates that the Federal government” *** use all practicable means *** for the purpose of creating and maintaining * * * conditions under which there will be afforded useful employment opportunities * * * and to promote maximum employment, production and purchasing power."
This act brought fortli a new political pragmatism. During the Eisenhower years the act was used to support the private sector. In the sixties the act was used for the so-called fine tuning of the economy and more directed political intervention. The seventies accelerated the trend toward control of the economic affairs of enterprising men.
Events of the late 1960's and the 1970's to date compounded to create an inflation nearly immune to control by traditional monetary
and fiscal policies. On August 15, 1971, President Nixon imposed the first comprehensive wage and price controls in the Nation's peacetime history. In one giant step the Nation moved toward a bureaucratically controlled economy. Subsequent ill-conceived policies and an inadequate administration of those policies created massive economic distortions, shortages, excessive deficit spending and credit creation, rampant inflation and the sharpest and deepest recession in 40 years. The anticipated $80 billion Federal deficit for fiscal 1976 exceeds the total of Federal deficits for the entire 20-year period 1948–1968. This I think is very significant in terms of the trends we are seeing today.
A primary reason underlying the accelerating trend toward Government regulation is the enterprise system's failure to cope with reality.
Today's modern, industrialized economy characterized by huge ogilopolistic business organizations side by side with huge labor unions are no longer controlled by impersonal market forces, but to the contrary largely, themselves, control the market. Administered pricing policies of huge corporations and wage determination by huge labor unions and institutionalized forces are largely exogenous to the market's functioning. In turn, these basic forces of inflation are largely noncontrollable by traditional monetary and fiscal policies. We have reached a point where a mixed politically privately directed economy cannot enjoy price stability, full employment and a handsoff policy in the wage-price determination processes. But we must pause here and think. Even though there is an extent to which prices and wages do not respond to market processes, does it necessarily follow that the answer to the problem lies in handing the crucial decisionmaking power to politically oriented men not directly involved in the problems, the planning, the complexities, and the frustrations experienced by business executives directly involved and directly affected by the outcome of the decisions made?
Consumerism with all this word entails in product quality and work safety has, in the seventies, become a matter of considerable concern, indeed, the public interest. In the essence of Keyne's "collective self-interest", the term "consumerism” denigrates individual judgment, freedom of choice and intelligence, and substitutes in the name of consumerism a protective mesh of regulatory agencies as champions of the individual. From this maze evolves bureaucratic, detailed, procedural regulatory power that is the primary nemesis of businessmen and the prime danger to the enterprise system.
President Ford recently asked the Office of Management and Budget to calculate the total cost of regulation to consumers who pay higher prices and are able to exercise fewer choices because of regulatorv requirements. OMB estimated an annual cost that "might” be as high as $2.000 per family or a total of $130 billion a year, the same figures Senator Nunn mentioned. This is equal to the total Federal personal income taxes paid which about doubles the governmental burden on the individual who as consumer ultimately pays all costs—for consumers as a whole there is no free lunch.
On January 17, 1976 the New York Times reported on a talk given by Richard L. Terrell, vice chairman of General Motors. Mr. Terrell asserted GM would spend more than $1.3 billion this year to comply
with Government regulations "which are often unnecessary or wasteful." Looking back at 1974, Mr. Terrell pointed out that spending to comply with Government regulations was nearly as much as GM expended on plants and equipment worldwide and about 25 percent more than the costs of special tools. Mr. Terrell said that, before Government regulations are put into effect, their costs should be weighed “to be certain they are indeed necessary for the welfare of the country and its people."
As I perceive Government over-regulation of economic affairs the first bit of reality is to distinguish between symptoms and the disease itself. Symptoms of the enterprise system's ineffectuality are everywhere-in deteriorating, sick, underfinanced cities; in transportation, in energy, in conservation, and use of natural resources, air and water pollution, in product and work safety, in capital investment and productivity, in education, in health care, in old-age assistance, in hiring practices, in employment maintenance; in effect, in every nook and corner of our economic environment, Government regulators exercise a heavy hand over decisionmakers.
The disease that underlies the symptoms is the exercise of power over the allocation and use of economic resources and the distribution of income derived from economic endeavor. In this regard the Nation is moving toward a command economy--a condition noncompatible with an enterprise economy.
In developing this brief testimony it was readily apparent that I could make no dent in analyzing the specificity of regulations as applied to specific industries nor as to the economic system impact in their entirety. However, the problem we face is, as cited, how and by whom power will be exercised within a democratic framework? If we are to preserve our democratic freedoms and institutions the only alternative we have is to refurbish and strengthen a dynamic market system that works and works effectively. That is, seat power once again within a viable and functioning marketplace.
I am not suggesting here that all Government regulations of economic affairs can be or should be abolished. We cannot return to the 19th century. We cannot ignore the structural and power relationships of our complex industrialized and urbanized society. While I recognize that compromise is necessitated by considerations of equity, practicality, and inescapable political considerations, we must nonetheless, deal with reality.
Executives I surveyed in preparing this testimony were unanimous in decrying the lack of guiding criteria and the differences in interpretation and enforcement of standards and regulations by individual regulators. That was an across-the-board complaint.
This applies to EPA enforcement of air and water pollution regulations, occupational safety and health standards, enforcement of hiring and discrimination practice standards, et cetera. While this kind of ad hoc bureaucratic regulation of specific situations, specific conditions, and specific instances constitute a costly and continual harrassment of business, the solution is not all that difficult to conceptualize.
First, change the perspective of Government regulation from the specific to the general. Rewrite the "rules of the game" in the sense