Similarly, the Jones Act, limiting commerce between two U.S. points to domestic fleets, should be repealed. The continuation of these restrictive practices increases the costs of transporting goods.

6. EXCESSIVE REQUIREMENTS OF STANDARDS-SETTING AGENCIES

The agencies referred to in this paragraph promulgate standards for the manufacture of products and for the operation of business facilities; the standards are designed to promote product safety, to protect the environment, and to provide safe working conditions. In many instances the regulatory bodies insist on a degree of protection that is unduly costly in relation to the benefits to be attained. Frequently, the standards rest on speculation and theoretical projections for which there is inadequate support. Implementation of these standards, especially when done on a "crash basis", adds significantly to the cost of production and is ultimately reflected in higher prices. The agencies engaged in these standardssetting activities include the Consumer Product Safety Commission, the Environmental Protection Agency and the Department of Labor.

It is not my desire to relax our vigilance and thereby permit real hazards to continue to exist. But much of the work of these agencies lies in evaluating conditions in the broad middle ground, where the likelihood of a hazard is highly conjectural. These agencies should be directed to limit their regulatory activities to remedying real hazards.

7. REPORTS AND PAPERWORK

Recent regulatory activities have increased the record keeping burden imposed on business. Examples include the Consumer Product Safety Commission's proposed requirements for accumulating and retaining customer data, and the National Highway Traffic Safety Agency's requirements for accumulating data on purchasers of tires. These will add significantly to the cost of operations. Consideration should also be given to the FTC's recently developed Line-of-Business Report. It will probably necessitate responding companies to change their accounting systems and gather detail not otherwise needed. Unquestionably, compilation of the report will involve significant time and expense. The report will probably enable the regulatory agencies to shift their focus from the "enterprise taken as a whole" to the segments of the enterprise. Policies that over look the "enterprise concept" may result in unfortunate tinkering with industry structure and organization. The wisdom of the Line-of-Business Report, as well as the need for other information requested of business, should be reconsidered.

8. DELAY IN MAKING DECISIONS

The Constitution in the first three articles provided for the executive, legisla tive and judicial branches of the U.S. government. The fourth branch-the independent regulatory agencies, was added much later. When my company was founded in 1886, there were no independent regulatory agencies. Fifty years later, at a time of the Depression, there were still only a handful-the ICC and FTC being the most prominent. Since the Depression, there has been established a new regulatory agency or board every second or third year.

The purpose of establishing this fourth branch of government, not specifically provided for in the Constitution, was for the stated purpose of achieving expeditious action in complex areas by specialized, expert bodies.

Unfortunately, instead of expediting action, one of the largest parts of the hidden cost to the public of regulation, is regulatory delay. This inherent delay in agencies set up for the purpose of speeding decisions, is certainly one of the most serious deficiencies of regulatory agencies today.

An example of such delay is the merger case before the Interstate Commerce Commission-which was filed in 1963, to merge the Rock Island with various western rail carriers. This railroad is the strategic connecting link-the bridge or intermediate carrier for Sears' goods moving from New York, Philadelphia, Columbus or Chicago to our California stores.

The Rock Island and the western railroads had been waiting since 1963waiting through 274 days of hearings, lasting over 271⁄2 months; waiting for the Administrative Law Judge to issue three volumes of an initial decision ten years later on February 15, 1973; and waiting for nearly a year after the ICC heard final oral argument on this case, for a Commission decision. On November 8, 1974, the Chairman of the ICC ́made a public announcement that a majority of the Commission had approved the merger of the Rock Island and Union Pacific

Railroads, with certain conditions, but that the Commission's decision would not be available for distribution for an additional "several weeks.'

The Commission's decision came five years after the ICC reported on the status of the Rock Island merger case at Senate Commerce Committee "oversight" hearings.

Eleven years ago, before this merger case was filed, the Rock Island was a profit-making railroad. Since 1965, while the case has been pending, the Rock Island lost approximately $90 million, with 1974 estimated losses of $17 million— up approximately 14 percent from 1973.

My company is not a party to this proceeding, and we neither approve nor disapprove of the merger. But the public and Sears is the loser for the interminable delay in this case. When this case is finally resolved, new and better routes can be established to more efficiently distribute goods. Because of the delay inherent in regulation, competition and change have been slowed, restricted and stifled. Everything waits until the bureaucratic process is completed.

In the marketplace the changes in products, customer needs and desires, and technologies present a constant challenge, and an individual business adapts or perishes. There is an increasing tempo of change in today's competitive world. To give a measure of how rapidly the pace of change has been quickened by postwar technological revolution, a few years ago Sears analyzed its mix of goods and found that well over one-half of all items then listed in the Sears' catalog did not exist twenty years before; and over one-third of all items did not exist ten years before.

Another measure of change-in the last decade while the Rock Island and other western railroads were waiting a merger decision in order to change their plant facilities, Sears in the retail markets served by the Rock Island, opened approximately 110 new stores, and closed or relocated 70 old stores.

As the need to respond to change quickens, it is vital that we reexamine schemes of regulation inherited from the past, to insure that they have not become agencies stifling change-protecting time-honored privileges or restricting innovation. The delay not only weakens the industries regulated by preventing their quickly adapting to changed circumstances, but also it weakens the regulatory agencies expert, specialized knowledge. For example, only two of the present eleven ICC Commissioners were serving in 1963 when the case was first filed.

The expert knowledge in this case on the part of at least nine former members of the ICC has been completely lost due to delay, and new commissioners have been added who were unfamiliar with the case. There is presently one vacancy pending on the Commission.

I would recommend three principles for inclusion in any legislation to undertake this long-overdue reexamination on the independent regulatory agencies:

First, each regulatory agency should be thoroughly reexamined to review the objectives and purposes of each activity for which it was established; to measure its actual performance with respect to each such activity, particularly the delay inherent in carrying out its purposes and objectives; and in today's inflationary costs, the burden of waste and inefficiency measured on a scale with the actual benefits to the public from each agency activity.

Second, Congress should impose a halt on the establishment of any new independent agencies, until this reexamination is completed. At a time of 12 percent inflation, we cannot afford to make more mistakes while we are trying to correct those of the past. It is disturbing to encounter proposals to add more governmental regulatory agencies when the need to weed out present inefficient and wasteful practices is everywhere recognized.

Third, any review if it is to be worthwhile should be conducted on an impartial basis. I would urge the Committee to reject proposals which would involve the agencies judging their own behavior, rather than having an independent look. Further, the 12-month, $500,000 review provided for in S. 4145, is far preferable to the three-year $3 million study proposed in other measures. The last thing we need is further delay in the effort to do away with present regulatory inefficiency and waste.

Again, let me express my appreciation, for the opportunity to submit this statement in support of the objectives of S. 4145, and its prompt passage.

Senator HUDDLESTON. Our next witness is Mr. Richard Godown.

STATEMENT OF RICHARD D. GODOWN, SENIOR VICE PRESIDENT AND GENERAL COUNSEL OF THE NATIONAL ASSOCIATION OF MANUFACTURERS

Mr. GODOWN. Thank you, Mr. Chairman.

My name is Richard D. Godown. I am senior vice president and general counsel of the National Association of Manufacturers. We are most pleased at the invitation to appear before you and give testimony on S. 4145, a bill to create a National Commission on Regulatory Reform. I am happy, also, Mr. Chairman, to be able to report that my testimony here today is endorsed by some 70 independent associations which are affiliated with NAM. They are the National Industrial Council. A list of these organizations is appended, and I would appreciate it if this could be made part of the record of this hearing.

It is a pleasure, Mr. Chairman, to report that NAM strongly endorses creation of a National Commission on Regulatory Reform and is happy to lend its support to S. 4145.

In his October 8, 1974, message to a joint session of Congress, President Ford cited the need to take "a long overdue total reexamination of the independent regulatory agencies." He called for a "joint effort by Congress, the executive branch, and the private sector to dentify and eliminate existing Federal rules and regulations that ncrease costs to the consumer without good reason, in today's 1economic climate."

We note that S. 4145 was introduced by request and therefore presume that it embodies the proposal put forth by the administration for accomplishing the objectives set forth by the President. We applaud these objectives and pledge the best efforts of this association and its membership to help achieve them.

Inflation has many root causes, with overregulation high among them. Henry David Thoreau long ago instructed, "That government governs best which governs least," a maxim which seems constantly to get buried under a never-ending flood of rulemaking. We do not propose to discuss here which particular agencies have offended most or how each has transgressed in some portion. We will earnestly address ourselves to this task when the National Commission holds its hearings. For the time being, suffice it to say that over the years we have observed a bureacratic turism at work: every government agency always attempts to expand its authority beyond the statutory grant. The net result is frequently that industry is saddled with unnecessary regulation which has no legal foundation.

Obviously there is recourse to the courts if this is so, but this produces delay, huge costs, and inferquent satisfaction even when you do prevail. Sales opportunities may have passed, a domestic or foreign competitor may have entered the market, or other developments have occurred which place one at a competitive disadvantage.

Paperwork is another problem which grows out of regulatory bureaucracy. The average American businessman and private citizen are being literally buried by an avalanche of required Government paperwork.

Between December 1967 and June 1974, businessmen found 159 more mandatory forms on their desks to be filled out. That made a

total of 2,178 in 1976. Individuals, too, filled out 189 additional Federal Government forms in the same period.

A further problem is the ever-present danger that agencies may play ping-pong with your interests. Permit me to cite an example. In one recent instance, a manufacturing facility which relies on natural gas was notified by their supplier that under curtailment plans, approved by the Federal Power Commission, their allotment of natural gas would be cut. The company requested allocation of propane as an alternative power source but was told the Federal Energy Administration handles this. Application at FEA brought forth the response that since the company was a natural gas user, it came under jurisdiction of the FPC and had to go there for relief. To add to the tragedy of what in other circumstances would be a humorous story, in the company involved manufactures insulation material, which is desperately needed to conserve fuel throughout the country.

Coming back now to the central issue, we would point out that we do not feel the National Commission should content itself with an investigation of whether the regulatory agencies are acting lawfully, but rather whether their overall activity seems to be in the best interest of the general public. In a larger sense, the Commission should seek to determine the impact of an agency's regulations on competition, prices, and supply. În other areas, it should ask: What are the results of regulations with regard to employment, energy conservation, and the environment? Are these concerns being properly balanced? Is industry getting proper guidance or simply a welter of regulation and general harassment? How does the public fare in all of this or have we arrived at a point where Government is too busy running the hospital to be able to care for the sick? Can we not all still easily agree that there should be greater reliance on market forces and less economic regulation by the Government?

We feel, Mr. Chairman, that creation of the Commission should not permit avoidance of those reforms in regulation which have been studied to the fullest. Neither should it hold up appropriate modifications of executive department rules and regulations growing out of recommendations of the Council on Wage and Price Stability. As you know, the President has directed the Council to identify programs within the executive branch whose costs appear to outweight any benefits to the public or which unnecessarily restrict competition or productivity.

Let me now discuss several of the specific provisions of S. 4145. In regard to Commission members: to serve along with two Members of the House and two from the Senate, the President is called upon to appoint four members from the executive branch and four from the private sector. We wonder at this composition. One speculates the executive branch members will be chairmen or high ranking officials from regulatory agencies themselves. Hence in assessing actual performance, they will certainly have a conflict of interest if not a biased point of view. We suggest that two individuals from the executive branch would be sufficient and that the private sector be allotted six members. Within this latter group at least half should be from business since it is business which is being regulated.

As to functions, we believe that in addition to the elements which S. 4145 calls for to be included in the report the Commission is to transmit to the President and Congress, there should be added a specific requirement for comment covering agency structure and operations. It may well be that these are already covered by the broad language of the bill, and if so, it will at least be helpful to have the legislative history so reflect.

With regard to scope, a great volume of regulation emanates from other than independent regulatory agencies. The departments of Government headed by Cabinet-rank officer as well as agencies not designated as regulatory frequently promulgate rules and regulations which are held to have the force and effect of law. In some instances the basis for the authority is statutory and in others may be bottomed on an Executive order. In any case, the effect on business is usually marked, and we would strongly urge that the charter of the National Commission be extended to cover examination of these areas of activity.

As to duration, given the rather broad nature of the task set out for the National Commission and the suggestions for expansion we ourselves have made, we feel that more than 1 year will probably be required to complete the work. Therefore, NAM would recommend a Commission lasting 2 years or longer if necessary.

Mr. Chairman, the President has called for a combined effort to rid the Nation of unnecessary regulatory control as a means to help stem inflation. On behalf of the National Association of Manufacturers, and the 70 or more organizations affiliated with the National Industrial Council, who join in endorsing this statement, we reiterate our support.

Again, thank you for this opportunity to be heard, and I will be glad to answer any questions.

Senator HUDDLESTON. Thank you, Mr. Godown.

[The full prepared statement of Mr. Godown follows:]

PREPARED STATEMENT OF RICHARD D. GODOWN ON BEHALF OF NATIONAL ASSOCIATION OF MANUFACTURERS

Mr. Chairman, my name is Richard D. Godown. I am Senior Vice President and General Counsel of the National Association of Manufacturers. We are most pleased at the invitation to appear before you and give testimony on S. 4145, a bill to create a National Commission on Regulatory Reform.

NAM is a voluntary membership organization composed of large, medium and small companies whose combined output amounts to approximately 85% of the goods manufactured in the United States and who together employ 82-85% of those engaged in manufacturing. Actions of regulatory agencies have a profound impact on the every day operations of these companies and their employees and therefore NAM has a keen interest in the legislation now before this Committee. I am happy to be able to report that my testimony here today is endorsed by more than 70 independent associations who are affiliated with NAM through the National Industrial Council. A list of these organizations is appended, and I would appreciate if this can be made part of the record of this hearing.

It is a pleasure, Mr. Chairman, to report that NAM strongly endorses creation of a National Commission on Regulatory Reform and is happy to lend its support to S. 4145.

At the outset let me state that during the course of these hearings the primary interest of NAM is focused on S. 4145. We do recognize that the Committee is also addressing itself to S. 704, the Regulatory Agencies Independence Act; S. 770, The Consumers' Information and Counsel Act; and S. 3604, The Federal Agency Efficiency Act. We oppose S. 770 on principle since it would establish still another independent agency called the Office of Consumers' Counsel for Regulated Serv