VideoJohn D. Graham isn't a well-known Bush Administration official, even inside the Beltway. But CFOs ought to acquaint themselves with this bureaucrat in the Office of Management and Budget (OMB), since he is responsible for making sure federal regulations don't impose too great a burden on business.
Graham, administrator of the OMB's Office of Information and Regulatory Affairs (OIRA), is in fact overseeing an approach to regulation that differs from what the Bush White House first set out to pursue. In fact, the change reflects the hasty retreat the Administration was forced to beat in the face of public protests over its initial plans, with complaints about the White House's position on arsenic in drinking water just the loudest such brouhaha.
The new approach is embodied in a seven-page memo, dated September 20, in which Graham outlined how he and his staff would review all "significant" regulations for strict compliance with a host of guidelines, including "science-based" risk assessments, cost- benefit analyses, and peer review.
At first glance, this might not suggest much change from the Clinton Administration's policy. Cost-benefit analyses, after all, have long been required before major regulatory changes take place. But under President Clinton, such analyses rarely led to revisions in proposed rules or their outright withdrawal. Or so the Bush Administration claims. It is in any case determined to enforce federal rules for rulemaking more stringently. And while it has appointed a number of regulatory skeptics to put its policy into place, John Graham is spearheading the effort.
"There has been a long-standing concern that when we adopt regulations without adequate consideration of science, engineering, and economics, we run the risk of both hurting the economy and hurting the intended beneficiaries of regulation," Graham told CFO in his first extensive interview since he took office in July.
By imposing more demanding analytical requirements on the regulatory process, he expects fewer new rules overall, as well as modifications to some existing ones and the elimination of others. But, he adds, "we're not looking necessarily for across-the-board deregulation. We're looking for smarter regulating that picks targets better, saves more lives, and does it in a more cost-effective manner."
A former Harvard University professor and director of the Harvard Center for Risk Analysis, Graham has a reputation for research, largely corporate- funded, that argues that the costs of many environmental and public-safety rules far outstrip their benefits. A study in 2000 paid for by AT&T Wireless, for instance, concluded that the timesaving benefits from talking on a cell phone while driving outweigh the costs of likely accidents.
Our Hero
Not surprisingly, the business community has hailed Graham's arrival. "With Clinton, any agency that wanted a regulation put it out," says Bill Kovacs, vice president of environment, technology, and regulatory affairs at the U.S. Chamber of Commerce. "There was no traffic cop. Bush has a traffic cop who will bring some discipline to the process."
Consumer, labor, and environmental advocates worry that this discipline will put too much power in a single office and ignore the benefits of regulation that are hard to quantify. "Graham has established a very strong presence, and I find it very troubling," says Gary Bass, executive director of OMB Watch, a regulatory watchdog group. "He has usurped agency authority, and he has placed heavy emphasis on economic tools for determining whether a rule goes forward."
Regardless, the Bush Administration is no less intent on lightening companies' regulatory load now than it was at the outset. On its first day in office, it issued an unprecedented order that stopped some 70 regulations that had been finalized in the waning days of the Clinton Administration from taking effect. These last-minute rules dealt with everything from the privacy of medical records to bus and truck emissions. Six days later, the White House told the agencies to withdraw all standards that were still pending review at OMB.
"We saw a flurry of 'midnight regulations' by Clinton, and Bush put a hold on them on day one," says Susan Dudley, a senior research fellow at the Mercatus Center at George Mason University. Many were eventually allowed to go through, she notes, but by reversing some and amending others, the Bush Administration sent a clear message that regulatory reform was a major agenda item.
No Clinton-era proposal drew more scorn than the so-called ergonomics rule on workplace injuries issued by the Occupational Safety and Health Administration (OSHA) last November. Business leaders decried the regulation, and Bush felt their pain, signing legislation in March to overturn the rule. The Labor Department is expected to announce soon whether it will develop a more limited rule or mere guidelines.
Poison Polls
But the aggressive rollback effort hit a snag in early spring when the Environmental Protection Agency (EPA) said it would rewrite a Clinton regulation that would have lowered the acceptable level of arsenic found in drinking water. For the first time, Bush's poll numbers dipped. A day after the Agriculture Department said it would stop testing ground beef in federal school- lunch programs for salmonella, something the meat industry urged, the agency secretary said a "low-level" employee had made a mistake and the testing would continue.
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