OMB Uses Questionable Tactics to Weaken and Block Safeguards, Thwart Congress

Agency is Poised to Overturn Years of Study to Help Regulated Industries, Public Citizen President Tells Lawmakers

WASHINGTON, D.C. - A White House office is using questionable economic tactics to transform itself into a chokepoint for public health and environment safeguards, weakening or killing essential rules that are opposed by regulated industries, Public Citizen's president told lawmakers today.

In doing so, the agency - the Office of Information and Regulatory Affairs (OIRA), which is part of the White House Office of Management and Budget (OMB) - threatens to overturn years of study, testing, research, analysis and public input that went into the crafting of rules to address long-standing problems. In doing so, it is thwarting the intent of Congress, which has never given this power to the agency and often has mandated that public health and safety should be placed above cost.

OIRA is doing this using regulatory accounting, which estimates the costs of proposed rules and compares them to the dollar amount of benefits, which are calculated by translating the prevention of human injury or death into dollars and cents. This methodology, though, is flawed because it is limited by the available data - garbage in means garbage out. Numbers can be easily manipulated toward a specific outcome, and the technique fails to document the public value of advances in the overall quality of life. Because of assumptions and available data plugged into the equation, these techniques tend to overestimate costs while underestimating benefits.

"It is outrageous that government would abandon its rightful role in providing a balance to market excesses, and collude in a form of bean-counting that systematically indulges an undue deference to corporate profits, while making little attempt to investigate, catalog or fund the collection of the real-world benefits of regulations," Claybrook said. She testified before the House Committee on Government Reform's Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs. "Most importantly, cost-benefit calculations abstractly ignore the human values we all treasure."

In its annual report to Congress submitted in December, which was the subject of the committee's hearing, OIRA listed 23 rules that it thinks agencies should change or rescind. The vast majority of the recommendations came from industry-funded front groups, Claybrook told lawmakers.

Rules currently on OIRA's chopping block include a standard for acceptable limits of arsenic in drinking water, a medical records privacy rule and Clean Air Act provisions requiring new power plants to install pollution control equipment when they are built and old facilities to install pollution-reducing equipment when they expand their operations in a manner that increases pollution emission significantly.

OIRA has required agencies to reconsider data that it had already disregarded as scientifically unhelpful or flawed, Claybrook said. Nevertheless, the OIRA report shows year after year that benefits exceed costs, making health, safety and environmental regulation one of the nation's best bargains.

OIRA is run by John Graham, who has a long history of using economic tools that are intrinsically biased toward industry. Before being appointed as OIRA administrator last year after a controversial nomination battle, Graham was director of the Harvard Center for Risk Analysis, which conducted research that generally drew conclusions favorable to the industries that funded the center, particularly the auto and chemical industries.

"We are deeply concerned that, in defiance of both express and implicit directions from Congress, an unaccountable OIRA will be able to overturn years of investment by the public, stakeholders, scientific experts and the agencies," Claybrook said.

Claybrook also gave lawmakers a copy of a letter she sent Monday to Graham excoriating him for the flawed reasoning he used to block a sound rule that would allow consumers to monitor the pressure of their tires. In that case, Graham ignored extensive research conducted by the National Highway Traffic Safety Administration (NHTSA), which proposed that auto manufacturers be required to put direct monitoring systems in vehicles. Graham, though, insisted the agency permit either direct or indirect tire pressure monitoring systems. The indirect system - which Graham calls a "one-tire standard" - is far less effective than a direct one, since all vehicles have four tires that need monitoring.

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Public Citizen Press Release - 3-12-02

House to Take Up Anti-Consumer Class Action Bill on Wednesday Legislation a Priority of Insurance, Tobacco, Drug and Auto Industries

WASHINGTON, D.C. - Legislation to be considered Wednesday by the U.S. House of Representatives would make it harder for consumers to hold corporate wrongdoers accountable for inflated co-payments to HMOs, padded cell phone bills, mysterious credit card "surcharges," fraudulent "late fees," mortgage loan kickbacks, automobile defects, prescription drug safety problems and illnesses caused by tobacco.

The legislation (H.R. 2341), the so-called "Class Action Fairness Act," is being pushed by the U.S. Chamber of Commerce, the National Association of Manufacturers, and the insurance, tobacco, auto and prescription drug industries. It is opposed by a coalition of consumer, environmental, health and labor groups including Public Citizen, the Consumer Federation of America, Clean Water Action, Earthjustice Legal Defense Fund, U.S. PIRG, Service Employees International Union, Communication Workers of America, the National Senior Citizens Law Center, the American Lung Association, the American Heart Association and the Campaign for Tobacco-Free Kids.

The measure would give defendants - usually large corporations - the right to move class actions filed in state court to federal court, even though the basis for the case would still be state law. Two corporate class action lawyers recently wrote in Litigation how this hurts consumers: "As a general rule, defendants are better off in federal court . . . there is generally a greater body of federal law precedent favorable to defendants." The groups opposed to the bill believe that corporate defendants should not have the power to choose the legal forum that they believe most benefits them. Moreover, state judges are much more familiar with the numerous laws that are the basis for state class actions, making them more likely than federal judges to feel comfortable interpreting state law in class action cases.

This legislation also will exacerbate the federal courts' current caseload crisis, delaying the resolution of all civil cases. That is why the Judicial Conference of the United States, chaired by Chief Justice William Rehnquist, opposes the legislation.

"Since the dawn of the consumer movement in the 1960s, perhaps consumers' most important tool has been the class action lawsuit," said Joan Claybrook, president of Public Citizen. "That is why corporate wrongdoers are fighting hard to take away this right."

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