Graham’s Nomination To Head OMB-OIRA Threatens
Health, Safety and Environmental Safeguards

John Graham, the Bush Administration’s nominee to head the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA), has a long record of intense opposition to government action on scores of health, safety and environmental matters on behalf of deep-pocket corporate contributors.

If confirmed, Graham would oversee the federal government’s entire regulatory system and virtually every step of the regulatory process. He would directly supervise the agencies’ information gathering activities to support new or proposed rules, control the agencies’ semiannual agendas and more informal priority setting, and evaluate the economic impact of every significant or controversial new rule.

At OIRA, Graham would pass judgment on — and could delay, block or alter — rules proposed by key federal agencies, including such agencies as the:

The centralized power of OMB’s "review" process can invite the undue influence of regulated industries. During the Reagan-Bush Sr. years, political appointees within OMB, in conjunction with councils run by Vice Presidents Bush and Quayle, had broad discretion to block rules, often at the direct request of chemical companies, auto manufacturers or other regulated interests. For example, Reagan’s OMB notoriously eliminated entire sections of an OSHA exposure rule on the deadly gas ethylene oxide, despite overwhelming technical support in the agency’s record. Graham’s well-documented, long-standing relationships with major corporations, including nearly a hundred chemical, agricultural, oil and gas, food and mining companies and trade associations which have funded his work, make him an exceptionally poor choice for this very sensitive position.

Current OMB director Mitchell Daniels has not been shy about the role he expects Graham to play in "controlling" the agencies. According to a May 25, 2001 article from The Washington Post, Daniels "made it clear during a House [of Representatives] subcommittee meeting that he plans to lean on Harvard professor John Graham, nominated to be the OMB’s regulatory czar, to police agency compliance" with federalism and cost-benefit rules established by OMB.

In the same Congressional hearing, Daniels said that any rule that does not meet a rigid set of criteria will be returned to the agencies for more work, a practice which could cause "paralysis by analysis" and cripple regulators’ and Congress’ ability to respond to emerging and urgent health, safety and environmental problems.

Graham is in many ways the ideal hatchet man for Daniels. For the past decade, he has been a highly vocal and outspoken proponent of so-called regulatory "reform" measures that demonstrate a basic hostility to the many goals of protective regulation. For example, Graham has repeatedly supported passage of a "super-mandate" that would make every proposed rule subject to time-consuming and onerous economic analysis, regardless of whether the enacting mandate from Congress has placed such goals as human or environmental health before considerations like cost. Graham recently signed onto the losing brief in a unanimous Supreme Court decision on the Clean Air Act in which he argued for requiring cost-benefit scrutiny as a prerequisite to agency action, regardless of the terms of a congressional mandate.

While on a Science Advisory Board involving a EPA rulemaking on dioxin, Graham claimed, in a gross contradiction of the leading science, that dioxin should be classified as a possible "anti-carcinogen." In other research, Graham suggested that a polluter should be able to bargain with the authorities to permit high levels of pollution, so long as the company paid into a fund to prevent violence or pregnancy. However, because Graham has done little or no scholarship documenting the cost-effectiveness of psycho-social programs to address violence or pregnancy, it is clear that the real agenda is merely to deflect government attention away from areas that would affect his corporate sponsors.

Graham’s nomination has deeply troubled dozens of national labor, environmental, safety and public health advocacy groups and academic and professional leaders, including deans of medical schools, a Nobel Prize laureate and former regulators such as Robert Reich.

These voices of opposition do not question Graham’s academic credentials to run his Center at Harvard, or to publish studies in support of his sponsors. Now that he has stepped forward as a political nominee, however, they do challenge his independence from the more than 100 companies and trade associations who fund the Harvard Center. Graham would be charged with being a gatekeeper for the regulation of these companies for whom he has prepared numerous studies that were used to oppose such federal regulation.

OIRA’s Oversight of Health, Safety & Environmental Protections

OIRA was created by the Paperwork Reduction Act (PRA) in 1980, and certain responsibilities are outlined in that law. Under the PRA and subsequent amendments:

Since the PRA’s enactment, other duties have been given to the office by a series of executive orders. The current executive order, Executive Order 12866, charges the OIRA Administrator with:

The combination of these sweeping powers makes OIRA very commanding. The office oversees the issuance of regulation from soup to nuts – everything from agency information gathering to agenda-setting to evaluation of a final rule falls under its purview and is subject to its considerable level of discretionary oversight. Beyond the words of the order and statute, of course it also matters how a particular administration intends to implement its review.

OMB’s powers also extend significantly farther than its direct responsibilities imply. Decision-makers in the agencies who anticipate that a proposal will meet with opposition from OMB are likely to squelch protective regulations in the advanced planning stages, without any record or notice to the public or Congress. And of course OMB’s primary power is control over agency funding levels, which can be lowered so as to cripple an agency in doing its job.

Although anti-regulatory coalitions have repeatedly tried to pass an omnibus regulatory review bill that would codify OIRA’s discretionary duties from the executive orders in a statute, thus far such attempts have failed. Because the grant of power to OIRA over some programs occurs only through the terms of an executive order, its exercise of certain responsibilities should be viewed by Congress and the public as very fluid and highly subject to political shifts. It seems likely, regardless of any promises obtained during the nomination fight, that Graham will re-write the terms of the current executive order to award his office and position even more far-reaching powers than it has today. Because OMB’s power is self-defining, it is essentially unaccountable to Congress or the public.

Plans to re-write the executive order are already in the works. The U.S. Chamber of Commerce told The Washington Post in February 2001 that it has drafted a presidential "executive order of its own that it hopes the new administration will use as a template for rewriting its policy on regulation." The draft order lays out the process for "how rules should be reviewed, the role of the Office of Management and Budget, and the economic and scientific criteria that agencies should apply to rule-making." "If you fix [OMB], you rein in all the agencies," said Bruce Josten, the Chamber's executive vice president for government affairs.

Another article, from March 3, 2001, in The National Journal, described Graham’s nomination and Center as "popular with business interests," and quoted Josten as saying that the Chamber of Commerce "would like to see OIRA re-established as a gatekeeper." The article went on to say that Josten believes OIRA should function as it did under Reagan or Bush Sr., "as the office that sternly questions or even stops rules that agencies have proposed."

To see how this would be accomplished, we next look closely at the definition of each of OIRA’s current powers. These are the tools that in Graham’s hands could be used to dismantle our system of public protections.

I. Meddling Most Efficiently: OIRA Interference at the "Front End"

At his May 17, 2001 nomination committee hearing, Graham stated that he hopes to apply his version of regulatory priority setting to the "front end" of the process, before significant agency action on a Congressional mandate has even begun. This strategy could freeze agency actions that are unpopular with the business community before they start and before the public or Congress is aware that an action was being considered.

As OIRA Administrator, Graham would have several openings for undue influence of the regulatory process, and could apply his favorite economic tools to slice, dice and mince the agencies’ regulatory proposals:

1) Oversight of the Regulatory Planning Process

The OIRA Administrator reviews the agencies’ semiannual "Regulatory Plans" before they are published, which set out the most important regulatory actions the agency expects to undertake. Graham could therefore stop regulatory actions in secrecy, before they are even proposed, presenting a significant opportunity for abuse and over-reaching.

The Tool: Implementing Sweeping, Industry-Biased Comparative Risk Analysis.

Graham has consistently promoted "comparative risk analysis" for government priority setting. Although Congress has never approved a regulatory "budget," which would set caps on industry regulatory costs, at OIRA Graham—a vocal proponent of the "regulatory budget"— could implement its functional equivalent, imposing a series of phony trade-offs upon health and safety regulation.

Graham has repeatedly pushed for a government-wide re-organization of regulatory programs, based upon a least-cost scheme. He has proposed putting rigid caps on each agency’s "regulatory burden" to industry. Then, only the most "cost-effective" regulations would be implemented. It should come as no surprise that under Graham’s method of estimating cost-effectiveness, programs paid for by the government, or for which costs are borne by the public at large, fare significantly better than programs paid for by regulated industry. Graham has never, nor has anyone, analyzed the cost of his own proposal, in terms of federal research expenditures and the needless delay of every significant government program.

Because often science is less certain about the cause of disease than it is about the cause of injuries, Graham’s approach systematically favors injury prevention measures and disfavors actions on environmental contaminants such as toxic chemicals. This bias also favors government action in areas that people can themselves affect, such as violence prevention, but leaves the public high and dry when it comes to things they are helpless to prevent, such as large-scale pollution by industry.

Graham’s economic priority-setting methods also ignore the public’s right to be free of unnecessary harm, and they omit any serious consideration of matters of justice and equity. In addition, when government regulatory programs are ranked according to costs per unit of risk reduction (a practice Graham has long supported), foregone industry profits are misleadingly given weight equal to that of public expenditures for regulatory programs.

2) Limiting Agencies’ Information Collection

The OIRA Administrator reviews requests from agencies to gather information from 10 or more entities and can grant or deny the request, which little or no external oversight or debate. Agencies need information to determine how best to regulate.

The Tool: Requiring A Demanding Cost-Benefit Analysis of Information Requests.

At his Senate nomination hearing Graham said he supports using cost-benefit analysis to evaluate and potentially reject the agencies’ information collection requests. But cost-benefit analyses for information-collection requests are generally impossible to create, because agencies cannot determine the value of the information until after it is collected. Graham’s approach would certainly slow or stall agency initiatives, because it would prevent the data collection necessary to develop or justify new rules.

II. Loading the Dice: OIRA Evaluation of Proposed and Final Rules

1) Review of Economic Analyses by the Agencies

Executive Order 12866 asks OIRA to review economic analysis produced by federal agencies in anticipation of new rules. Before a rule is finalized, it obviously makes sense for an agency to identify what effects the rule will have on human health and safety, the environment, governments, and industry profits. Cost and benefit information is very useful to the public, decision-makers, and regulated industry. In theory, OIRA’s director should serve as an honest broker, deferring to agency expertise on most technical and scientific matters.

The Tool: Requiring a Rigid Cost-Benefit Analysis of Proposed and Final Rules.

Graham has a long record of support for sweeping cost-benefit measures that would concentrate much greater discretion and power in both the OMB and regulated industries at the expense of the agencies and the public. For example, Graham has supported legislation that would have opened federal regulatory decisions to endless court challenges over the agencies’ economic estimates and mandated a full peer review of the agencies’ scientific decisions by panels that will have numerous industry representatives, including from those companies proposed to being regulated.

There are many practical impediments to achieving certainty in either economic or scientific analysis of proposed rules. Economic calculations are often disputed because, while public health and environmental benefits are frequently omitted or underestimated, costs consisting of foregone industry profits are generally overestimated. For example, a 1995 study by Congress’ Office of Technology Assessment found that the actual, after-the-fact costs of industry complying with OSHA’s vinyl chloride rule were only one quarter of OSHA’s original estimate, which was based on the cost estimates from regulated industry.

The science to support rules is also developing. In some areas, we have good data on the number of people with disease or injury, but the mechanism for exposure to harmful chemicals, or the reasons for the human body’s response is unclear. In such cases, we should act to protect the public from harm in advance of demonstrated damage, because the delay caused by waiting to perfect the science will cause unacceptable human suffering.

The numbers can even be deeply misleading. When costs and benefits to the public, the government, and business are conflated into a single "net benefits" number, no one can tell whose costs and whose benefits are represented. For example, are pollution clean-up costs paid by the polluting industry, the public or the government?

In addition to the practical problems, these types of calculations raise insoluble moral issues. Cost-benefit analysis as it is currently practiced converts all or most benefits into dollar amounts. It is hard to come up with valid figures. For example, the value of a human life in the workplace is extrapolated from the amount of additional money low-income workers receive when they work in dangerous jobs. And when environmental benefits, such as the value of a clear view across the Grand Canyon, cannot easily be "monetized," they are frequently left out of the equation altogether.

The Tool: Inappropriate Discounting of Health, Safety and Environmental Benefits.

Graham has made it very clear throughout his career in academia and in appearances before Congress and the news media that he advocates for a heightened use of cost-benefit analysis when reviewing agency regulatory proposals. There are enormous biases and distortions with the use of cost-benefit analysis as employed by Graham that favor industry wishes over the needs of society to ensure safe workplaces, healthy communities and a clean environment.

One such bias is Graham’s long-endorsed practice of discounting, or reducing the value of goods, such as cleaner air and water and improved public health, that are received in the future to an estimate of their "present value. But it is not true that non-monetary benefits, such as health, and environmental benefits, are worth less tomorrow than if they would be now. We have no reason to believe that endangered species will be worth any less to society in ten years than they are today. It seems likely that, given the rate of species and habitat destruction, in fact they will be worth far more.

Discounting the value of future health, safety, and environmental benefits systematically makes regulations with long-range benefits seem far more unattractive than they actually are. By discounting health, safety, and environmental benefits received in the future, we underestimate their true value to society.

III. OIRA Oversight of Agency Risk Assessments

Risk assessments attempt to predict the health effects that occur when people are exposed to hazards. Analysts must estimate the extent of the exposure and the probability that the exposure will lead to harm, such as debilitating accidents or cancer.

Graham has advocated for much greater White House oversight of agency risk assessments, for greater reliance on risk assessments, and for increased standardization of scientific and policy assumptions across all of the agencies. If these policies are implemented, we can reasonably expect regulations that will be less protective and priority setting that will be less rational, because it will be based on misleadingly precise-sounding estimates of risk that are, for the most part, little better than guesses. Yet the outcomes could and likely will be used to undercut the ability of informed regulators to make humane judgments.

The Tool: Requiring Scientific Certainty Before Regulating.

It is obviously appropriate for the federal agencies to scientifically evaluate risks. However, disagreement over the details of risk assessments can cause paralysis by analysis. OMB could force agencies to wait years before they are able to regulate known hazards, while more and more data of increasingly limited value are collected.

Because we know little about how toxins work on the human body, even a risk assessment costing millions of dollars may only be marginally useful in the regulatory context. Risk assessments require an enormous amount of data which can be difficult or impossible to obtain. For example, scientists still lack accepted tools for measuring the effects of many non-cancer health risks in humans. Scientists are sometimes unable to produce even ballpark estimates of the extent of human exposures to carcinogens and other hazards.

To move from the often very limited available data to actual estimates of human risk, assessors frequently rely on dozens of assumptions in a single assessment. While some assumptions are based purely on scientific judgment, more often the assumptions used reflect policy decisions. One example of the latter is the very controversial assumption that in the absence of a finding to the contrary, any level of exposure to known carcinogens should be considered to pose some risk. While this assumption reflects the core missions of some agencies to protect the public from reasonably likely threats, even if the threats have not been proven absolutely, it has been unpopular with Graham and others, who would prefer that agencies use less public-protective assumptions.

Of course, the results depend to a great degree on the assumptions that drive the risk assessments. Graham and others have argued for the creation of a "central estimate" of risk across agencies. This kind of proposal – because it depends upon an average – would inevitably fail to consider when chemicals pose special risks to vulnerable populations, such as children or the elderly, and could run counter to an agency’s core mission to protect the public.

From a scientific perspective, such proposals ignore so many differences in data collection practices among scientific disciplines that many scientists consider any one determinative number to be nonsensical. As toxicologist Ellen Silbergeld testified before the Senate in 1995: "Calculating a "central estimate" of risk is like "averaging the winning percentage of all Los Angeles sports teams — basketball, football, hockey, and baseball— to derive a central estimate of likely success for an athlete playing in that city."

In summary, risk assessment can improve agency decision making only if it is based on good data and reasonable assumptions. However, for most risks that agencies must address, data are limited and consensus about assumptions does not exist. In addition, different assumptions about risk are appropriate for different agencies, because the agencies have been charged by Congress with carrying out different regulatory mandates.

The Tool: Put Economists in Charge of Regulatory Scientists

An aggressive OMB review of risk assessments puts economists in charge of evaluating the hard science data produced by agency chemists, biologists, engineers, geologists and other scientists.

As on the dioxin Science Advisory Board, where Graham said that dioxin should be labeled an "anti-carcinogen," Graham has already amply demonstrated his willingness to opine on scientific and other highly technical matters despite his lack of training in the underlying hard science disciplines. In this way, the level of arrogance of OMB overseers can make a substantial difference in the amount of second-guessing of agency experts and risk assessments that OMB expects to do.

Adam Finkel, a risk assessor for OSHA who has a Ph.D. in Environmental Science, has complained bitterly that OMB reviewers often get it wrong, writing that

[n]ot only has OIRA's track record on scientific questions in risk assessment been one of confusion and oversimplification, but it arguably has not even been on the leading edge of the rigorous estimation of the net economic costs of regulation, the area in which it is supposed to be the expert.

Adam M. Finkel, "A Second Opinion on an Environmental Misdiagnosis," New York Univ. Environmental Law Journal, vol. 3, 1995, p. 364.

Other scientists have also complained.

OMB's comments are full of errors and misconceptions that demonstrate a fundamental lack of understanding by OMB of the scientific methods relied upon by OSHA. OMB's comments are also remarkably lacking in scientific objectivity... In some instances, OMB's errors are so blatant that they can only be understood as attempts by OMB to discredit OSHA's analysis by any means possible.

Kenny S. Crump and Robin Gentry, Risk Analysis, vol. 13, 1993, pp. 487-489.

 



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