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Efficiency and
Compassion:
The Carter
Regulatory
Program
JVly subject today is regulatory reform — an
important topic which, like so many important
topics, can be deadly dull. So, in the best "once-
upon-a-time" tradition, let me begin with a few
stories:
• The public library in Rudd, Iowa was nearly
forced — in conformity with federal regulation
— to install ramps for handicapped persons. It
was exempted from the rule when it was learned
that the cost of building the ramps would almost
equal the library's annual budget — and that
not a single handicapped person lived in Rudd.
• An unregulated trucker can haul railroad ties
if they are cut from logs that were sawn cross-
wise; if the logs were sawn lengthwise, however,
the trucker must get a certificate from the In-
terstate Commerce Commission. Similarly, he
can haul riding horses to be used for personal
Remarks by Douglas M. Costle,
Administrator
United States Environmental Protection Agency
The Town Hall, Biltmore Hotel
Los Angeles, California
October 17, 1979
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pleasure, but not race horses; whole wheat, but
not wheat germ; and parrot food, but not
hamster or gerbil food.
• Hospitals in Baltimore are required by federal
regulations to keep the water in patients' rooms
at 110 degrees or less; they are required by city
law to keep the water at 110 degrees or more.
• A meat-packing plant was told by one federal
agency to wash its floors several times a day for
cleanliness . . . and was told by another federal
agency to keep its floors dry, so that employees
wouldn't slip and fall down.
This sort of story shows up regularly in the
newspapers and on television. If such anecdotes
were rare, they might merely amuse us — as
reminders of our common, human fallibility.
But they are not rare; they have become fre-
quent enough to arouse resentment, and a de-
mand for reform.
The federal government today has 90 regula-
tory offices — most of them in the Executive
branch, but 18 of them in independent regula-
tory commissions. These offices issue a total of
7,000 rules of various kinds a year. About 2,000
of those rules have a significant impact on state
and local governments or private industry, and
about 100 have major economic impacts.
The cost of these regulations is disputed. It's
estimated that federal environmental rules alone
impose direct costs of nearly S20 billion a year;
state and local environmental rules impose even
more. A 1979 study by the Business Roundtable
of federal regulation on 48 large companies
placed regulatory costs on them at $2.6 billion.
Nobody really knows the total cost of federal
regulation, nor the benefits that should be
deducted from the overall figure. I've seen esti-
mates ranging between $50 and $150 billion a
year. Whichever figure is nearer the mark,
federal regulation costs a lot of money.
Now let me tell you a different kind of story
about federal regulation:
• In 1933, bank-failures ran at the rate of 40
percent; since then, because of federal require-
ments, the failure-rate has dropped to less than
one percent — and not a single depositor has
lost a cent in the failure of a federally insured
bank.
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tration has a capital cost $2.1 billion below the
original Ford Administration proposal. As a
result of intensive analysis by OSHA and the
President's Regulatory Analysis Review Group,
the cost of a regulation to control acrylonitrile
— a chemical used to produce resin, rubber, and
other products — was reduced by $100 million
below the original proposal.
Elimination of unnecessary regulation and
reduction of paperwork has also resulted from
the President's reforms:
• OSHA has cut out 1,000 standards that did
not contribute to worker safety, and exempted
40,000 low-risk businesses from annual reporting
requirements.
• EPA has speeded up average processing time
for rural water-treatment applications by more
than a year — saving local governments several
hundred million dollars annually.
• HEW has reduced the reporting burden asso-
ciated with its education programs by an esti-
mated 274,000 hours annually — by omitting
superfluous data, combining forms, and reduc-
ing the number of people required to fill them
out.
Finally, by making regulation easier to under-
stand, federal agencies believe they can encour-
age voluntary compliance and reduce the need
for enforcement. My personal favorite in this
category is the following regulation from the
FCC:
"Except as provided in paragraph B of this
section, applications, amendments thereto,
and related statements of fact required by the
Commission shall be personally signed by the
applicant, if the applicant is an individual."
The new version, translated into plain English,
reads as follows: "If you are an individual, you
must sign the application personally."
In all these ways, the reforms mandated by
the President are saving billions of dollars,
millions of hours, and heaven only knows how
many ulcers. But because regulatory programs
are created by Congress, comprehensive, perma-
nent reform requires new legislation approved by
Congress.
Hence the President has submitted a proposal
known as the Regulation Reform Act of 1979.
In addition to making permanent the improve-
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ments already ;n slated by the President within
the Executive Branch, it would extend them to
the independent agencies. Among the features of
the bill are these:
• An agency proposing a major rule must list
alternative ways of achieving the same objective,
as well as the costs and benefits of each. If the
agency does not select the least expensive option,
it must explain why.
• Each agency must review all its major regula-
tions every 10 years, to eliminate outmoded rules
and keep others up to date.
• Agencies must publish lists of proposed rules
every six months — both to help other agencies
spot duplications, and to give industry and the
general public a chance not merely to comment
on the rules, but to participate in their formula-
tion.
• Finally, the bill would simplify procedures for
agency hearings, reducing needless formality and
delay. It would also require agencies to set dead-
lines for most proceedings.
Simply stated, President Carter's reforms em-
phasize three main goals: to get rid of bad
regulations, to save the good, and to improve
federal management of the regulatory process.
This is an important goal, and a worthwhile
one. Precisely because it is so popular, however,
we can oversimplify the complexity of regulatory
reform and demand hasty action where thought-
ful analysis is needed.
We must recognize, for example, that our
modern, industrialized society has created prob-
lems no government ever had to deal with. Until
1945, to choose just one sector of industry, most
chemicals were derived from natural plants.
Each of them had been "screened" by our en-
vironment; three million years of human beings
had found out, through the process of trial and
error, whether these plants were edible, or
useful, or dangerous.
Since World War II, our synthetic-chemicals
industry has developed substances which the
human kind — and perhaps even our planel —
has never encountered before. Among them are
thousands of chemicals that save lives, increase
agricultural production, and improve our stan-
dard of living.
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We see the same resistance today on the part
of the trucking industry, which has put together
a major lobbying effort to kill deregulation on
Capitol Hill. And a number of other industries
that denounce federal interference with their
operations positively insist on it when it protects
subsidies to which they have long been accus-
tomed, or when it keeps foreign competitors out
of domestic markets.
President Carter recognized both the benefits
and shortcomings of federal regulation in a
message to the Congress last April. Much of it,
he said, "is vitally important to modern society.
Goals such as equal opportunity, a healthy en-
vironment, a safe workplace, and a competitive
and truthful marketplace cannot be achieved
through market forces alone."
Further on in the same message, however, he
said that the overall regulatory system has
become "burdensome and unwieldy."
"Our society's resources are vast," he con-
tinued, "but they are not infinite. Americans are
willing to spend a fair share of these resources
to achieve social goals through regulation. Their
support falls away, however, when they see
needless rules, excessive costs, and duplicative
paperwork. If we are to continue our progress,
we must ensure that regulation gives Americans
their money's worth."
Those measures are already showing results.
Among the specific improvements that might be
cited are these:
• Airline deregulation saved travelers $2.5
billion in the first year alone; reduced fares at-
tracted more customers and boosted airline pro-
fits. (Though it hasn't happened yet, deregula-
tion of trucking will save $5 billion a year.)
• EPA regulations lowering the level of water-
pollution control on hundreds of industries that
do not discharge toxic pollutants will save about
$200 million in control costs — with no loss in
water quality. Our "bubble" policy, which
allows plant managers to choose the most eco-
nomical control strategy for air emissions, will
permit savings of 25 percent; an electric utility in
Tampa reports that the "bubble" approach cut
the cost of controlling sulfur-oxide emissions by
$20 million.
• According to Labor Department estimates, the
cotton-dust standard adopted by this Adminis-
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But .unong them, too, are chemicals that have
caused serious harm, and whose effects we can-
not judge for years: thalidomide, DBS, PCBs,
and pesticides ranging from DDT to Kepone.
Today about 4.5 million chemicals are known,
45,000 are in commercial distribution, and it
takes a team of scientists, 300 mice, two to three
years, and about $300,000 to determine whether
a single suspect chemical causes cancer.
It is both fashionable and easy to say that Big
Government creates Big Regulation . . . that
bureaucrats write new rules to keep themselves
in business. I must admit I have occasionally run
into a federal employee who seems to have an
ideological repugnance to business, and an
evangelical zeal to regulate it.
But this is generally not true. The much larger
fact is that a Big Society has spawned a thousand
problems that the Founding Fathers could not
dream of. In the last 20 years, we have come
through an era of legislation unprecedented in
scope, variety, and quantity. Congress has
passed law after law which the Executive Branch
is required to administer . . . and even though
each may make sense in itself, the accretion of
these laws slowly builds a cumulative burden
that can interfere with business without bestow-
ing any compensatory benefit on society.
We have to sort out our rules, not throw them
out. We must safeguard vital social goals, yes —
and President Carter's reforms do not retreat
from any of them.
But we must also get rid of rules that need-
lessly discriminate between gerbil food and par-
rot food, between crosswise logs and lengthwise
logs; we must restore competition to healthy,
mature industries that do not need regulations
passed in a time of monopoly 75 or 100 years
ago; we must enable American business to
devote its energies to production — not of forms
and data, but of goods, services, jobs, and na-
tional economic health; and we must make
American government use its delegated powers
with efficiency as well as compassion.
Reform of regulatory operation, not retreat
from national goals: this is the course that Presi-
dent Carter has set, and it has already proved its
value. It is a course which, I hope you will
agree, merits your support.
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EPA is charged by Congress to protect the Nation's land, air and water
systems. Under a mandate of national environmental laws focused on air
and water quality, solid waste management and the control of toxic
substances, pesticides, noise and radiation, the Agency strives to formulate
and implement actions which lead to a compatible balance between human
activities and the ability of natural systems to support and nurture life.
If you have suggestions, questions
or requests for further information, they
may be directed to your nearest
EPA Regional public information office.
EPA Region 1 • JFK
Federal Bldg. • Boston
MA 02203 • Connec-
ticut, Maine, Massachu-
setts, New Hampshire,
Rhode Island, Vermont •
617-223-7223
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Federal Plaza • New
York NY 10007. New
Jersey, New York, Puer-
to Rico, Virgin Islands •
212-264-2515
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and Walnut Streets •
Philadelphia PA 19106
• Delaware, Maryland,
Pennsylvania, Virginia,
West Virginia, District of
Columbia •
215-597-4081
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Courtland Street NE •
Atlanta GA 30308 •
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North Carolina, South
Carolina, Tennessee,
Kentucky •
404-881-3004
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Dearborn • Chicago IL
60604 • Illinois, Indiana,
Ohio, Michigan, Wiscon-
sin, Minnesota •
312-353-2072
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Elm Street • Dallas TX
75270 • Arkansas, Loui-
siana, Oklahoma, Texas,
New Mexico •
214-767-2630
EPA Region 7 • 324
East 11th Street*
Kansas City MO
64106 • Iowa, Kansas,
Missouri, Nebraska •
816-374-6201
EPA Region 8* 1860
Lincoln Street •
Denver CO 80295 • Col-
orado, Utah, Wyoming,
Montana, North Dakota,
South Dakota •
303-837-3878
EPA Region 9*215
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Francisco CA 94105 •
Arizona, California, Hawaii,
Nevada. Pacific Islands
.415-556-1840
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-DO
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• The federal safety standard for infants' cribs
became effective in 1974; since then, crib deaths
by strangulation have fallen by half, and injuries
by 45 percent.
• According to the General Accounting Office,
federal regulations for motor vehicle safety —
seat belts, interior padding, and stronger doors
— saved 28,000 lives between 1966 and 1974.
That figures does not include lives saved by
lowering the speed limit in response to the
energy situation.
These two categories of story capture, it seems
to me, the essential difficulty inherent in our
current demand for regulatory reform. On the
one hand, evidence shows us that some federal
regulations are silly, that they impose cost
without adding any compensatory benefit, and
that they ought to be thrown out. On the other
hand, evidence shows us that some federal
regulations control individual and corporate
behavior in socially beneficial ways that the
market cannot, that they are saving lives, and
that they must be retained.
The trick, of course, is to know which are
which — and there is no easy formula to tell us.
For one thing, the public is ambiguous about
federal regulation. According to opinion polls,
the citizens believe — by a small margin — that
there is too much regulation. But when asked
about specific kinds of regulation — such as
that affecting worker safety, clean water, and
protection against toxic wastes — they reply that
even more regulation is needed. Their feelings
are reinforced by reading about Love Canal, or
Three Mile Island, or the crash of a DC-10.
Moreover, despite their criticisms of regula-
tion, businessmen don't agree on which rules
should stay, and which should go. The most
conspicuous success we have had at deregulation
so far is in the airline industry which flatly op-
posed it. Colonel Frank Borman, Chairman and
Chief Executive Officer of Eastern Airlines,
recently said that: "As one originally opposed to
deregulation ... I must now go on record as
stating that my fears proved groundless." And
Fred Kahn, now the President's Chief Inflation
Adviser and former Chairman of the Civil
Aeronautics Board, stated that: "We dragged the
airlines, many of them kicking and screaming,
into the free market and right to the bank."
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