heartedly agree with. But the first question is principally a matter of clarification.

One of my concerns with the reform of the regulatory processthis may be a freshman concern and I ought to look first at the legislative process and determine what, if anything, needs to be reformed in the process of making policies before it is implemented. I am a little confused as I read through the lead-in to your very good set of questions that ought to be asked. In the middle of page 4 the report says it is also important for policymakers to know what the potential impact of the rule is likely to be before rules and regulations are implemented.

You say at the bottom, "I recommend that these or similar questions be incorporated as guidelines into the legislative history accompanying the legislation which follows." I get back to page 6 in the summary I think and again you are talking about these questions being asked as part of the regulatory reform analysis. So my first question is if these questions are important for the regulators to ask as they go into, say, the factfinding process you have suggested, has CED and your committee given some thought to the appropriateness of these issues being addressed at the committee level here as some of these policy changes are being suggested to give a clearer definition to the regulators when they are asked to implement the policy?

Mr. EBERLE. I am delighted you asked that question, Senator, because the CED report does in fact address that. I did not address it today because it is outside of these three bills I was focusing on. As a matter of fact, we have made a recommendation for a congressional approach to seeing that legislation has criteria for determining when regulation is appropriate. We recommend that Congress apply these criteria when a bill is being considered. We have adopted a similar approach for the Executive Branch regulatory agencies. We have tried to make adjustments for each branch of government. We are suggesting for that Congress CBO could help the legislative process by providing the public hearings with a review of whether or not the independent regulatory agency has applied these criteria.

Senator DURENBERGER. Let me ask you specifically then-we have clarified that-on page 5 I think it is question No. 3, is the Government's goal feasible? The identity you give to that question and the two subparagraphs seems to make that question more appropriate to the legislative process than to the regulatory process. But if you feel it is applicable to the regulatory process, I want you to explain or clarify a little more what kind of questions ought to be addressed under the issue of the feasibility of the goal. Mr. EBERLE. The answer is yes, we do believe it is applicable to the legislative process. A good example is price controls. Can price controls really solve any problem? The answer to that in my opinion is very seldom, but maybe selectively. It really creates more distortions than anything else. So you start to say we are going to put price and wage controls in across the country. Is it really feasible? Will it accomplish anything? I think I could give you the list of these kinds of issues that have to be looked at because sometimes you are better off simply letting the system work in solving market problems, and then look at the other side of this

saying we don't really need to effect this issue. What we really need is there are going to be some hardships that take place; that is, there is going to be an increase in energy.

There is going to be an increase in energy. There are going to be some poor people who simply cannot afford it. But you don't put price controls on which distort the entire economy. You solve the social problem, but do it separately. This way it would be much less costly and much most cost effective and beneficial to all groups in society.

Senator DURENBERGER. But is that question appropriate for an agency to address? Could the goals be better achieved or more efficiently achieved legislatively? It seems to me by the time it gets to the regulatory stage those questions should have been answered in the legislative area.

Mr. EBERLE. No, I think, Senator, the same thing could be true in OSHA. In other words, if you start to look at some of the regulations, there are some of the regulations that if they had started, let's say, with a general approach, the market would have solved their own problems for them, without having to get into details of saying you must rebuild a plant. As a matter of fact, if the cost of whatever the damage we are trying to avoid or correct had been specified and an incentive given to correct it, it would have largely been solved automatically, without trying to get into the specifics of the use of hard hats and everything else, as opposed to rebuilding a total production line. It is that kind of approach that is important in how you regulate, also.

Senator DURENBERGER. My last question, and maybe I have missed it here somewhere, relates to your feelings about the needs for a political process in the scope of judicial review in the regulatory process.

Mr. EBERLE. Again, this question was not addressed in the CED statement. Obviously it is my opinion that you must have the regulatory analysis, but the judicial review should not be applicable until after the rule has been in place. It simply is a temporary, intermediate area and the judicial review is simply not applicable at that time. If it was, nothing would ever get accomplished. You have to let the rules go forward.

It is a legislative, administrative matter. Judicial review, it seems to me, only comes into effect after the rules are in place and then under the normal conditions at that time. Otherwise you have a nightmare, nothing will ever get done.

Senator DURENBERGER. Thank you.

Senator PERCY. Thank you very kindly.

I would like to get your comments on two areas, intervenor funding and sunset. In your statement, at the bottom of page 10, you suggest that regulatory sunset proposals before Congress are unlikely to be successful in reforming existing regulatory policies, mainly because, and I will quote your words, "a total and immediate termination of an agency is such a drastic action that it may rarely be used."

Later in your statement, however, you say that S. 445 contains superior procedures for reviewing existing regulations than various provisions of S. 262 and S. 755. Without the strong action forcing mechanism of agency termination, however, how can you be so

optimistic about the effectiveness of S. 445 as a vehicle for reviewing agency regulations? We have heard cautionary notes on the necessity for a mechanism as drastic as termination. I certainly want to take another good look at that. What we are trying to accomplish is a regularized means of reviewing regulatory agencies. If Congress fails to do so, there is a stiff penalty. But I would like your comments on that.

Mr. EBERLE. I think there is a basis for confusion in this area. If an agency is going to go out of business, it will mobilize itself to be sure it stays in business without really looking at how to improve itself; whereas, the process that we are suggesting here, and I think you have suggested in S. 445, is if you have a trigger point which says it must be reviewed, you bring in an outside agency to look at what the problems are, whether it has served its purpose, in relation to the same kind of criteria we have on pages 4, 5 and 6 of the testimony. This way you lay the basis for congressional oversight. You have a question of whether an agency is really going to come in with their recommendations. This is why you need independent recommendations. This what we strongly support in sections 5 and 6 of S. 445.

The effort will be spent to see how those two recommendations compare, and you get a better chance to have that kind of a dialogue. If as a result of that dialogue you decide it should be terminated or parts of it terminated, you have a better chance of getting the information and enough heat stirred up between recommendations as opposed to the abstract issue of abolishing or staying in business.

Senator PERCY. Are there any other thoughts you have on alternate mechanisms, we could create to bring about action if termination is too drastic?

Mr. EBERLE. I guess there would be several potential suggestions. One would be a total review of the budget, with an automatic cutback of 30 percent if the review isn't completed satisfactorily, which forces them to prioritize their issues. Another one is they would have to list 20 programs and you drop off the last 20 percent of those programs and the costs of those programs. I think it depends on how you organize the congressional review and the independent study of what you are looking at. But I think those kinds of trigger mechanisms which really force a review of specific programs is what you are going to have to get it.

It may be, as part of that, you do decide to terminate them, but I don't see too much of that occurring now.

Senator PERCY. Finally, in your statement you express a personal reservation about the proposal in S. 262 to provide funding for public intervenors in regulatory proceedings. Is your main concern that the proposal is too loosely drafted, allowing for instances of abuse or waste of money, or does your objection reach the underlying concept of intervenor funding itself?

We have had very strong support for this idea from commissioners associated with FTC. They say this has really worked and worked well. But we have also heard strong testimony and opinions that intervenor funding would just mire down the process and be very costly in a tight budget year.

Mr. EBERLE. My personal reaction is that it is too vague and that it has to be restricted and it should not be in the hands of the agencies. The answer to this is if there is sufficient information on all issues, there is no need for this. That is probably 80 percent of the issues. As an example, I could come in as a private organization and ask for funding and have them do my research, whether I was for or against it. I think that kind of abuse is possible the way the bill is now drafted.

I think what is important here is that if we are to have the public participate, and there is a particular point of view or series of points of view that are not coming forth or cannot come forward, there should be a very limited amount of money in the administrative conference. People could request support under a specific program where they have to say to the Conference, "We need some funds for this, this and this," and prescribe what that is.

Then I think as a matter of principle, public participation is part of the public policy dialog and one should not deny that participation. But to have it open as a boondoggle for agencies to just go out and fund their friends would be a serious mistake because their friends come in all shades, and I may be one of them.

Senator PERCY. I want to thank you very much indeed. I hope you make your plane all right. I do want to commend CED for its overall study on redefining the Government's role in the marketplace. I think we really need that study. I look forward to it very much and hope we can have it available as soon as possible.

Mr. EBERLE. Thank you, Mr. Chairman.

[The prepared statement of Mr. Eberle follows:]

WILLIAM D. EBERLE, CHAIRMAN, SUBCOMMITTEE ON REGULATION AND THE

ROLE OF GOVERNMENT IN THE ECONOMY

COMMITTEE FOR ECONOMIC DEVELOPMENT

the economy.

My name is William Eberle, Managing Partner, Robert Weaver Associates, and I am pleased to have this opportunity to testify in support of the intent of the legislation before your committee. Over the past two years, I have chaired a subcommittee of the Committee for Economic Development (CED) which has studied the growth of regulation and other forms of government involvement in As you know, CED is a nonprofit organization composed of some two hundred prominent corporate executives and university presidents. CED initiated its study because of the trustees' concern for improving the long-term performance of the U.S. economy. As a result of this work, CED will, within the next few weeks, release its National Folicy Statement on Redefining Government's Role in the Market System. Part of this policy statement deals with the growth and purpose of regulations as well as their effect on the economy. In my capacity as chairman of the CED subcommittee which drafted this policy statement, I must tell you that our analysis has resulted in

a broad consensus among business executives and academicians that overregulation has seriously eroded the effectiveness of markets.

While some regulations

have provided benefits, excessive regulatory interference with the market system has resulted in enormous costs to society by contributing to inflation through raising costs of production, reducing productivity and technological innovation, and retarding economic growth

sufficient benefits.

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very often without achieving