The MacNeil/Lehrer Report; Murray Weidenbaum and Federal Regulation

JIM LEHRER: Good evening. Back in December, a top federal regulator in the Carter administration gave the Reagan people some advice: beware of the rape, pillage and bum crowd; they`ll be out to capture your soul. Seven months into the Reagan administration now, there are critics who say the capture has happened. Labor, environmental and civil rights leaders, among others, say the administration`s war on federal regulation is a disaster for many of the basic protections Americans had. Just today, William Konya, president of the National Carpenters Union, accused the administration of gutting federal rules on workers` safety.

The administration says it`s merely trying to eliminate the burden of unnecessary regulation and red tape, the cost of which, according to one key official, is $100 billion annually. Just today, the Associated Press said a quiet deadline for Cabinet secretaries had passed -- a deadline for giving a White House task force on regulation reform a list of all executive orders on the books that should be eliminated. The Carter official who issued that warning in December was Douglas Costle, then head of the Environmental Protection Agency. The Reagan official who laid out the cost of regulation at $100 billion a year is Murray Weidenbaum, chairman of the president`s Council of Economic Advisors. Tonight, a Costle-Weidenbaum mix-up on each man`s favorite subject, federal regulation, Robert MacNeil is off; Charlayne Hunter-Gault is in New York. Charlayne?

CHARLAYNE HUNTER-GAULT: Jim, the Reagan administration`s regulatory revolu- tion has involved either postponing, withdrawing, rewriting, or targeting for review more than 100 regulations. They include auto pollution and safety standards, industrial pollution and waste disposal, also nuclear licensing. The radical changes the administration is seeking in these areas should prove easier than its tax and budget victories in that for the most part they do not require congressional approval. As part of its strategy, the administration has established a special deregulatory task force headed by Vice President George Bush. In addition, the Office of Management and Budget also has been given new authority to review all future regulations, principally weighing benefits against costs. Jim?

LEHRER: First, to Douglas Costle, administrator of the Environmental Protection Agency for the four years of the Carter administration. He also headed up the administration`s regulatory council, which acted as a clearinghouse for all regulatory matters for President Carter. Mr. Costle is now in the private practice of law. How do you like the way the Reagan administration is going about the business of regulatory reform thus far, Mr. Costle?

DOUGLAS COSTLE: Frankly, not much. I think the early indications are, from the actions today, are that we`re not really talking about regulatory reform; we`re talking significantly about regulatory retreat. And I think you see it in case after case almost across the board. A lot of the critics have begun to say, and J think they`re substantially correct, that this administration is allowing itself to become a jellybean jar for the special interests. And I despair of the fact that all we`re doing is pushing these real problems off to be solved well into the future, and it`s a penny wise, pound foolish policy because those problems aren`t going to be any cheaper to solve -- in fact, they`ll be more expensive to solve -- down the road.

LEHRER: What kind of special interests are making it under the Reagan administration regulated area?

Mr. COSTLE: Well. I think in the regulated area, almost across the board. Those who are being regulated are seeking relief and are seeking an easing of regulations. And by and large they seem to be getting them. Now there are still a lot of regulations under review. The record of this administration won`t be written in six months. But the early signs -- and particularly in the area that I`m most familiar with, the environmental area -- are that they do plan to provide a substantial measure of regulatory retreat.

LEHRER: Could you give me an example of one or two of what you would consider the grossest retreats that are at least on the platter right now?

Mr. COSTLE: Well, one came up just today, in fact, that I was made aware of: the hazardous -- it has to do with hazardous waste landfills. Under the Resource Recovery and Conservation Act, which provides authority for EPA to regulate hazardous waste operators and facilities, we required -- as permitted by that law -- that operators of these kinds of hazardous facilities obtain insurance so the people who might be injured, or who have been injured, would have an avenue for compensation. The current EPA administration is proposing to eliminate that requirement altogether, which is not only a loss of substantial leverage on getting these hazardous waste operators to clean up their operations -- because insurance companies won`t insure them if they`re not being operated soundly. But it is in fact absolutely inconsistent with this administration`s professed desire to find private sector remedies. What better remedy than to have private insurance companies essentially make judgments on whether landfill operators can be insured on the basis of whether they`re performing in a sound environmental fashion?

LEHRER: What do you think of the administration`s general thesis, and particularly Mr. Weidenbaum`s general thesis, that this regulation that is now in effect is costing the economy $100 billion a year? Do you just -- do you agree with that?

Mr. COSTLE: No, I really don`t subscribe to that figure. And in fact, a House Interstate Foreign Commerce Committee had hearings this spring, and spent a great deal of time debating that figure and the methodology by which it was arrived. The fact of the matter is that nobody has a true figure. Murray came up with these figures, and in a fashion that essentially involves looking at regulatory agency operating budgets, applying a multiplier, and then adding up a total figure at the end. So the figure does not bear any real relationship to reality. And even if it did, the fact of the matter is that`s probably less than three percent of GNP, and at this point in time, who`s to say that`s too much or too little when we may be talking about very substantial costs in the future in terms of health, safety, environmental damage.

LEHRER: Speaking of too much, the other principal thing that the administration has been saying is that folks like you -- they don`t name you by name: we`ll give Mr. Weidenbaum a chance to in a moment if he wants to -- but folks like you -- regulators -- in the past have gotten carried away and gone too far with your regulating. Is that -- do you deny that that`s happened?

Mr. COSTLE: I flatly deny that. The fact of the matter is that EPA has, for the entire period of its existence, done cost-benefit or cost-effective regulatory analysis. And the basic dilemma that you have is that it`s very hard to get cost data. I even went back at one point and asked the staff to take a look at the six most expensive rules that the EPA had ever adopted, and find out what we`d projected -- what EPA had projected -- the cost of compliance would be, what industry had projected the costs of compliance to be, and what actual cost of compliance was. And in four out of those six cases, both industry and the government overestimated what it ultimately cost to comply with those regulations. In only one instance did both government and industry underestimate, and in that instance the EPA estimates were actually closer to the mark. But if you can`t get good cost data, the dilemma gets even more acute when you try to develop good benefit data. Now, my objection to the notion of cost-benefit analysis is not that you don`t use it, but you have to use it very, very carefully, and you have to be aware of the biases that go into constructing the assumptions that run the models. And these models tend to be viewed as mechanistic formulas for deciding whether to go or not go with a regulation.

LEHRER: We want to pursue that in detail that in a moment, Mr. Costle. Thank you. Charlayne?

HUNTER-GAULT: Now for the administration`s side of the argument, for that we go to its chief architect on regulatory reform, Murray Weidenbaum. Mr. Weidenbaum is chairman of the Council of Economic Advisors. Mr. Weidenbaum, has the administration been captured by the rape, pillage and bum crowd, and are you in a hasty regulatory retreat?

MURRAY WEIDENBAUM: No way. What we are trying to do is to introduce some badly needed balance into the regulatory system. I hesitate calling it a system. If you look at the reality you see an endless array of federal rules and regulations, many of which are simply impossible to enforce. Now, Mr. Costle is quite free, of course, to criticize my numbers. But the fascinating thing, of course, is, where did I get them? The largest portion of that $100 billion is the cost of environmental regulation. I didn`t use my own numbers; I used the numbers of the U.S. Council on Environmental Quality as prepared under the Carter administration. Now, there are private estimates are much higher than that, but I thought that the CEQ estimates, as we call them, really got across the notion, which is very basic, that this nation is devoting a very significant amount of resources to a whole array of regulatory programs, and it`s high time that the consumer, the taxpayer -- and it`s you and I who ultimately bear the cost of these programs -- get off-setting benefits.

HUNTER-GAULT: Well, what about -- excuse me. Go ahead.

Mr. WEIDENBAUM: As one thing -- one point I want -- I think we need to make, is the fundamental difference between setting up a regulatory program, and actually achieving its objective. In between you have the bureaucratic process at its worst.

HUNTER-GAULT: All right. Well, what about the -- you heard the worst-case - - one of the worst-case examples that Mr. Costle gave. How do you respond to that -- the EPA hazardous waste problem?

Mr. WEIDENBAUM: Very simply. By looking at the fundamental problem of hazardous waste. It is the inadequate supply of environmentally sound disposal sites. And here the problem you will see is not at the federal level, but at the state and local level. Doug, I`m sure you recall that your own agency -- just a few years ago; I believe while you were administrator -- gave the state of Minnesota a grant to build an environmentally sound and safe disposal site for hazardous substances. You know, you actually got the money back because the stale of Minnesota couldn`t find a single site in the entire state where some or another citizens group objected. Now, that is really the problem. You and me, who want to see a cleaner environment, but just like the problem of where do you locate the jail, where do you locate the mental institution, where do you locate the dump site, and of course, we want it in the other guy`s area. Now, that`s not -- I repeat -- a federal problem; that`s a state and especially a local problem.

HUNTER-GAULT: And it should not --

Mr. WEIDENBAUM: That`s precisely why we took the action we did.

HUNTER-GAULT: And it should not be construed as the part of this retreat Mr. Costle accuses you of?

Mr. WEIDENBAUM: That`s right.

HUNTER-GAULT: What about the charge he made that you`ve become a "jelly bean jar for the special interests" -- that basically, business and industry can get anything they want?

Mr. WEIDENBAUM: First of all, it`s not true- Secondly, it`s cute and clever, but what is our basic objective? We look upon the regulatory programs from the viewpoint of the ultimate consumer, the ultimate citizen, because after all, those higher costs are borne by you and me in the form of higher prices, and it`s important that we get offsetting benefits for those higher costs. And very frankly, the sad reality is, far too frequently, what do we get? We get well-intentioned programs followed by red tape and just the bureaucratic process at work, and not the cleaner air, cleaner water, safer work places, that we anticipate.

HUNTER-GAULT: What about his point on the cost-benefit analysis, though, that you can`t quantify the benefits, that you have to use this whole approach of cost-benefit analysis very, very carefully, and basically it`s very difficult to apply?

Mr. WEIDENBAUM: Oh, he`s right. We have to use it very carefully. Sometimes you have good numbers in terms of dollars, and sometimes you don`t. Some of the most important benefit-cost analyses have been done precisely where you don`t have dollar signs, but where there are people on both sides of the equation. For example, and this is back in the Carter administration, the case of the proposal to ban nitrites in the use of meat. I thought they did a very wise decision. They did what I call the best type of benefit-cost analysis. They looked at the people who would benefit from eliminating nitrites in meat and the people who would be hurt by eliminating the nitrites in meat. The benefit would be the elimination of a very mild carcinogenic hazard affecting very few people in a very mild way. The cost of eliminating nitrites would be the greater amount of botulism, and hence, the great number of deaths that would occur because of eating bad meat. And quite clearly, the costs of that regulation in terms of people would have been far greater than the benefits in terms of people, and the government didn`t regulate. That, I think, is a very wise benefit-cost type of analysis. And I commend the previous administration for it.

HUNTER-GAULT: Mr. Weidenbaum --

Mr. WEIDENBAUM: In a burst -- an unusual burst of nonpartisanship for me, at least.

HUNTER-GAULT: All right. How about a few well-chosen words, possibly a burst of nonpartisanship, for brief analysis of Mr. Costle`s basic achievements or record while he was in the government.

Mr. WEIDENBAUM: It was a mixed bag. He did do some good -- and I commend him for it -- in terms of trying to introduce some economic concepts into the regulatory process -- such as the offset program, such as the bubble concept. The negatives, very frankly, were the kind of points I referred to earlier. Each of these very well-intended changes was enveloped with such an array of red tape that in practice you get very few projects approved. And therefore, in order to achieve the benefits that he and I, I think, both desire, you do need to look at, not deregulation, not gutting regulation -- to use all those emotional words -- but a very fair-minded, balanced approach at regulatory relief.

HUNTER-GAULT: All right. Thank you. Jim?

LEHRER: What`s wrong with that, Mr. Costle?

Mr. COSTLE: Well, nobody`s going to argue with the notion that you should be as efficient in regulating as possible. But I`m talking in some instances of just decisions basically not to regulate, or to walk away from a cost-effective regulatory solution. You know, we did studies continually on the economic impact of environmental regulations, and I have yet to see one that has come in that indicated that the benefits in Tact did not exceed the costs. And one of the quarrels that I`ve always had with Mr. Weidenbaum`s $100-billion figure is that there is no effort in developing that figure to also develop a profile of what compensating benefits are.

Mr. WEIDENBAUM: The criticisms work both ways. First of all, I`m criticized for recommending benefit-cost analysis, and then I`m criticized because I show that the high cost justified doing the benefit-cost analysis, and therefore, I only look at costs. On the contrary, if there`s any contribution that I`ve tried to make into this public arena in regulatory area, it`s the notion that when government regulates, it generates both benefits and costs. We need to give equal weight to both of these vital aspects.

Mr. COSTLE: And by and large, the laws really require you to do that, and that -- an effort is made -- has always been made -- to do that, at least under the environmental --

LEHRER: But you say {unintelligible}. Right, Mr. Weidenbaum?

Mr. WEIDENBAUM: I could think of so many examples. Let me give you just one among many. Not one of these silly trivial ones; I could give you a whole array of those if you pressed me.

LEHRER: I won`t. I won`t.

Mr. WEIDENBAUM: Burning high-sulfur coal. The high-sulfur coal, of course, really pollutes the environment. You would think that the environmental laws and regulations would encourage people to burn low-sulfur coal, which really doesn`t pollute the environment. Look at- -- again, not at the theory, but at the reality of environmental regulation. Those scrubbers that are mandated by EPA apply equally to burning cheap, high-sulfur coal or expensive, low-sulfur coal. So it`s more economical under those regulations --

Mr. COSTLE: Murray, that -- that`s just not quite accurate.

Mr. WEIDENBAUM: That`s true. As a result, you -- burning a high-sulfur coal, you wind lip polluting more than if you burnt a low-sulfur coal.

Mr. COSTLE: Congress originally made the determination that we should not prohibit the use of high-sulfur coal, but if we were to use it, to ensure that it was burned cleanly, and they required by law, and essentially tied the administrator of EPA`s hand, and said you shall require the technology be used when you`re burning that high-sulfur coal. And that`s -- the motivation for Congress on that was no secret. Basically the kind of coal that is mined throughout the East, whether you`re talking about Ohio, large portions of West Virginia, Kentucky, Indiana, Illinois, is all very high- sulfur coal. And Congress was concerned -- rightly so, I think. In this round on the Clean Air Act, Congress will have to bit that bullet again. They were rightly concerned that if they allowed utilities simply to go out and buy low-sulfur Western coal, that it would put all of those Eastern mines -- or tend to put all those Eastern mines -- out of business. And --

LEHRER: So it was a political decision?

Mr, COSTLE: By the Congress. And it was a social judgment made by the Congress that it was -- that you could have both. That you could bum high- sulfur coal, and that you could bum it cleanly, and that you should not, essentially, destroy the Eastern coal markets.

Mr. WEIDENBAUM: That`s just my point. It was a decision not based on which action gets you a cleaner environment.

Mr. COSTLE: Explain that to the miners in Ohio. I tried. Without much success.

LEHRER: Mr. Costle, the point Mr. Weidenbaum`s made several times now. and I tried to get at it a minute ago, not too successfully, is that There may be a well-meaning regulation that is passed by Congress, and then it goes to a regulatory agency to enforce, and that well-meaning purpose gets all swallowed up and stuck in all the bureaucratic red tape and the bureaucratic process becomes so expensive and so cumbersome that it`s hard to find out what the benefit from all that was in the final analysis.

Mr. COSTLE: Well, I think if you pare back a lot of that and look at a set of facts, one of the things that you`ll discover is that once Congress orders an agency to regulate, the agency then prepares to regulate. Then all the special interests who are affected -- the regulated community -- comes in, and by the time you`re through it can take -- now, nowadays -- two to four years to get a regulation out, number one. And number two, it is litigated to death before it finally becomes effective. And in the case, for example, of just trying to get a rule that would stand judicial review -- and all of our rules are basically holding up very well under judicial scrutiny -- to get that regulation out that forces power plants to put best-control technology on, to clean up, took two years, $4 million of economic studies by EPA to finally arrive at that rule. I am very hard- pressed in my own mind to see how this administration will be able to improve on that analysis. And they have already, in fact, proposed to lessen, to give relief, to essentially roll back that standard that we put on new coal-fired power plants. And there can only be one result from that, and that is that you`ll have a lot more air pollution.

LEHRER: Charlayne?

HUNTER-GAULT: Mr. Weidenbaum, I`d like to ask you about the decision that you`ve made to give OMB the right to intercede in the business of independent agencies. What`s the reason for that? Isn`t that defeating the purpose of an independent agency?

Mr. WEIDENBAUM: Quite clearly, everything we`ve done has been checked out by the lawyers to make sure that we`re obeying the letter and the spirit of the law. But more important, the authority to issue regulations on the part of those independent agencies remains unimpaired. I do think it`s useful to have OMB -- to have, as the Office of Management and Budget, give them an opportunity to make an independent analysis.

HUNTER-GAULT: Why?

Mr. WEIDENBAUM: So that the concerns of the consumer, of the citizen, of the taxpayer, can be analyzed and represented, and not just those of a narrowly focused federal agency.

HUNTER-GAULT: But is that the usual mission of the Office of Management and Budget?

Mr. WEIDENBAUM: Oh, the Congress, last year, as you may know, broadened OMB`s authority to cover a wide array of regulatory functions. The Paperwork Simplification - et cetera, et cetera -- Act of 1980.

HUNTER-GAULT: How do you see that, Mr. Costle?

Mr. COSTLE: I see it as an unfortunate kind of precedent. Basically what it boils down to is that you turn over to a relatively small staff in the White House, that can`t be brought before Congress and before congressional committees, can`t be interrogated, essentially -- in effect -- a backroom opportunity to write the final rules. And the concern has always been -- and this happened during the Nixon administration, which was one of the reasons Congress objected so strongly to them -- was that it was one more back room for the special interests, essentially, to work their will over final rules, and I -- and now I really doubt seriously whether the role of OMB ought to be to write the rules. I think it is proper for OMB and for the Council of Economic Advisors to ask -- to insure that proper analysis is being done. But that`s not what the Reagan system does. The Reagan system, in effect, has moved de facto rule making over to the White House.

Mr. WEIDENBAUM: I suggest that Mr. Costle. not any longer being in the government, hasn`t kept up to date as to what is actually happening. And I must totally disagree with his description of what we are doing. There is no back room. There is no rewriting in OMB. The rule-making function is squarely on the part of the regulating agency, and as he properly indicated, it is necessary for an organization that doesn`t have an ax to grind to have the opportunity to make an independent review, evaluation, critique, if you will, but the decision to go ahead with the rule stays with the agency having that authority. Period.

HUNTER-GAULT: Don`t most people who look at Mr. Stockman think he has a budget ax to grind?

Mr. WEIDENBAUM: And he grinds it quite sharp, although if you look at history, one of the most rapidly rising areas of the budget is the budget for the regulatory agencies. Why. the regulatory functions of EPA have increased 20 times. Not 20 percent. Twenty times since 1970. I think that`s pretty generous treatment.

Mr. COSTLE: But the budget of regulatory-

Mr. WEIDENBAUM: I can assure you the Council of Economic Advisors` budget has not increased 20 times since 1970.

Mr. COSTLE: The budget of the entire, of all the regulatory agencies in the federal government is a drop in the bucket compared to the budget of virtually any of the other major functions of the federal government you want to point to. And indeed this administration is wielding a sharp ax. In 1982 they`ve cut EPA by 12 percent. And if you take inflation into account, the real cut is an effective 20 to 22 percent. They`re now proposing in 1983 a real cut -- or an effective cut -- in budget dollars and people of 20 percent, and if you add another 5 to 10 percent inflation, you`re talking at least 30 percent in `83. So in two years` time this administration has cut the Environmental Protection Agency`s budget by -- effectively -- by 50 percent just at the time when it should be out enforcing the laws against hazardous waste, enforcing the laws against toxic chemicals, and cracking down on the remaining sectors of industry that have failed to comply with basic environment. Ninety percent of American industry has complied with the basic requirements of the Clean Air and Clean Water Act. It`s the 10 percent that haven`t, and they`re -- I`m afraid they`re -- going to get free run.

Mr. WEIDENBAUM: Let me nail this. Really. I think I`ve been patient, and there are a lot of wild charges. First of all, you -- Doug, you know the part of the EPA budget that we`ve cut. It`s the biggest white elephant. It isn`t the regulation of the environment that we`ve cut. The big cut has been in those sewer grants where you imposed on local governments literally white elephants -- those tremendously large, out-scale, out-sized pollution sewerage systems. In so many cases, you know what`s happened. They haven`t had the money to operate the darn things because those sewer systems were far larger than justified by local conditions. Some of them, like the ones in Alaska, you`re dealing with a non-problem because --

Mr. COSTLE: Murray, my figures don`t even include the sewer projects.

Mr. WEIDENBAUM: -- where there`s -- where does the material go --

Mr. COSTLE: And I`m talking about the operating budget, not the sewers.

Mr. WEIDENBAUM: The material goes into the Arctic Ocean. We have provided what we believe to be a very adequate array of funding for all of the regulatory agencies. The regulatory agencies` budgets, if you look at 1980 to "81 to `82, do increase. If there`s anything that we`ve given a priority to in the period of budget restraint, it`s been this area.

LEHRER: We have to leave it there. Gentlemen, thank you both. Douglas Costle and Murray Weidenbaum, thank you both very much. Good night, Charlayne.

HUNTER-GAULT: Good night, Jim.

LEHRER: We`ll see you tomorrow night. I`m Jim Lehrer. Thank you and good night.