Quiet Revolution:
Under President Bush,
Regulatory Rollback
Has a Major Impact
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From Banks to Baby Bells,
Corporate Donors Gain
From Cutting Red Tape
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Case of the `Candy Stripers'
WASHINGTON -- Six months into his presidency, George W. Bush is
quietly and steadily using the federal government's far-reaching
regulatory authority to stamp his imprint on American society.
Aided by a cadre of appointees who are skeptical of government
regulation, if not hostile to it, Mr. Bush is easing enforcement of many
government rules. And the effects of the changes are beginning to
reverberate throughout the nation's economy, among banks and hospitals,
oil companies and telecommunications giants, employers with
labor-management problems and corporations seeking tax breaks. At the Department of Health and Human Services, a top official has
vowed to stop "overzealous" Clinton-era fraud investigations of some
hospitals and nursing homes. The Environmental Protection Agency has
frozen a probe of more than 100 energy companies suspected of violating
the Clean Air Act, after Vice President Cheney questioned whether the
law had been properly applied.
The Department of Labor is shifting emphasis from prosecution of
workplace violations to helping employers avoid violations in the first
place. And just yesterday, Treasury Department officials moved to change
tax-shelter regulations to ease reporting requirements on certain
transactions by businesses.
In each case, administration officials say they're no less committed
to stamping out wrongdoing than their predecessors. But their approach
to regulatory policy represents a philosophical shift as sharp as any
occurring in the legislative arena.
"We are not a bunch of crazy, wild-eyed deregulators," says Cameron
Findlay, the Deputy Secretary of Labor. "But we want to look at the
costs as well as the benefits. And we don't want to do anything stupid."
The effort seamlessly blends the philosophic bent and political
self-interest of the nation's first president to hold an MBA. Cheering
on Mr. Bush's approach to regulation are the corporate executives who
financed his presidential bid, helping raise a record-smashing $104
million for his primary campaign and $166 million in unregulated soft
money donations to the Republican National Committee. Most of his top
financial backers come from businesses with huge stakes in regulatory
shifts, including banking companies, utilities and health-care
providers.
Administration officials say their regulatory decisions will be made
openly according to scrupulous cost-benefit analysis, not other factors
such as insider influence. "It's very important that the public has full
confidence that decisions are being made on the merits," says Budget
Director Mitch Daniels.
For GOP donors and administration officials alike, regulatory
rollback represents a major piece of unfinished business. Ronald Reagan
set out to tame regulations in the 1980s. And even George Bush, who took
a more moderate approach to regulatory issues, named his vice president,
Dan Quayle, to head a White House "competitiveness council" designed to
curtail the reach of rules.
What's different this time is that the Republican administration --
from top cabinet officials to second-tier appointees -- is more
uniformly conservative. The upshot: Just as district attorneys decide
which crimes to emphasize and how aggressively to enforce them,
individual agencies are setting their own priorities. And they're
heeding candidate Bush's pledge to give Americans "more choices and
fewer orders."
The new approach has already sparked some intense battles. Senate
Democrats registered strong opposition to the nomination of John Graham
as the top regulatory official at the Office of Management and Budget.
Mr. Graham, a Harvard specialist in weighing the costs of government
action against its benefits, was an adviser to the GOP Congress when it
unsuccessfully attempted to pass a regulatory overhaul in the mid-1990s.
In the Senate Commerce Committee yesterday, Democrats sought to kill the
nomination of Mary Sheila Gall as chairwoman of the Consumer Product
Safety Commission, arguing that she sides too readily with industry on
regulations to protect children.
And in one notable area, the environment, the White House has been
forced to backpedal. The administration's early decision to block
stricter limits on arsenic in drinking water touched off a furor. But
lately, EPA Administrator Christie Whitman has labored to blunt
politically damaging perceptions of a tilt against environmental
protection, deciding this week to force General Electric Co. to pay
several hundred million dollars to clean up damage to New York's Hudson
River.
On other issues receiving less fanfare, however, the administration
is forging ahead with regulatory changes:
Health
At the Department of Health and Human Services, officials have
signaled several changes that have pleased health-care providers. Most
important is a different approach to enforcement of rules against fraud
by participants in the Medicare and Medicaid programs.
Under Mr. Clinton, says Tom Scully, the administration's top official
for the programs, "some of the efforts became overzealous to the point
where good, honest providers . . . felt under siege." For example,
during Mr. Clinton's administration, HHS officials surveyed practices at
all nursing homes every 12 to 15 months, as required by law.
But that's "nutty," says Mr. Scully, since some nursing homes
consistently comply with government rules better than others. Mr. Scully
says the administration also is forming teams of agency experts to find
"new ways of doing business that will reduce administrative burdens and
simplify our rules and regulations."
Other changes are under way. Health maintenance organizations that
offer benefits under Medicare have extra time to decide whether they
will remain in the program and won't have to collect data that might
have led to lower payments for some.
Financial Services
Yesterday, Treasury changed its tax-shelter regulations to allow
corporations to avoid reporting "many legitimate business transactions"
they were previously required to disclose. The modifications "will help
taxpayers and practitioners to better understand and comply with the
rules," said Mark Weinberger, assistant Treasury secretary for tax
policy. At the same time, the changes tightened restrictions on
tax-shelter promoters to ensure that they register certain types of
confidential transactions.
But a Democratic member of the House Ways and Means Committee
predicted the moves will have a far different effect than the
administration is advertising by eliminating some triggers for
disclosure or registration. "This Treasury Department is not only weak
in fighting corporate tax abuse," said Democratic Rep. Lloyd Doggett of
Texas, "it does not even want abuse disclosed." Treasury officials
strongly disputed that, saying the triggers were redundant or confusing.
Secretary Paul O'Neill also has launched a broad review of existing
money-laundering regulations amid complaints from some banks that they
are too burdensome. Among other things, officials have said they are
considering ways to lower the number of currency transaction reports
banks must file on cash deposits exceeding $10,000, perhaps by granting
more waivers for regular customers not considered money-laundering
risks.
Telecommunications
Telephone companies, which donated more than $12 million to
Republicans during the 2000 campaign, have certainly felt the
difference. During Mr. Clinton's administration, the Federal
Communications Commission backed efforts by the Federal Bureau of
Investigation to force phone companies to update their equipment to
permit more effective wiretaps. But Mr. Bush's team, led by FCC Chairman
Michael Powell, appears to be warming to the industry's view that the
FBI demands are excessive and costly. A decision from Mr. Powell is
expected by September.
The FCC is also backing away from its Clinton-era efforts to audit
the books of Bell companies such as Verizon Communications Inc. and SBC
Communications Inc., both of them among the top donors of unregulated
"soft money" to the GOP. Several years ago, an internal FCC review
concluded that the Bells overstate their costs by up to $5 billion per
year, leading customers to pay higher rates. Under Clinton-appointed
Chairman William Kennard, the FCC began pushing the companies to correct
their books.
Bell companies have disputed the report's findings, arguing that the
FCC audit was based on faulty survey methodology.
In the past few months, people familiar with the situation say,
senior FCC officials have quietly directed that those efforts be
shelved. Other top officials at the FCC are now drafting a memorandum
cutting the agency's accounting requirements sharply, making it harder
for potential fraud to be discovered. Such regulatory "streamlining"
began under Mr. Kennard. But now Mr. Powell is pushing toward its formal
adoption this fall, over the opposition of many state regulators, who
argue that the changes would make it harder to protect consumers.
An FCC spokesman rejects the suggestion that campaign donations
influenced the agency's regulatory stance, explaining, "We aren't
political." And in some areas, Mr. Powell has sought to strengthen
oversight, by, for instance, seeking stiffer penalties for Baby Bells
found to engage in anticompetitive behavior.
Labor
The change in direction is especially pronounced on regulation
affecting workers. Under Democrats, the chief beneficiaries of organized
labor's political largesse, the Labor Department usually sympathized
with unions on regulatory issues. Under Republicans, it generally won't.
"We don't represent business," says Labor Secretary Elaine Chao,
dismissing suggestions that her policies are affected by employers'
political and financial support for the GOP. "We don't represent unions.
We represent the work force."
Mr. Bush's aides backed the successful effort in Congress to block
the Clinton administration's "ergonomics" rules designed to prevent
repetitive stress injuries. Now the Bush team is considering a new
approach, which could include publication of "Best Practices" already
used by industry.
Another prospect for change: a different approach to enforcement by
the Occupational Safety and Health Administration. Business executives
have complained that OSHA has focused on small infractions and used
different standards in different parts of the country. Assistant Labor
Secretary Chris Spear says the department may consider encouraging
companies to seek recommendations from third-party safety experts.
Following those recommendations would help shield companies from civil
penalties for subsequent OSHA violations.
The shift extends to quasi-independent federal agencies affecting
workers, too. Mr. Bush's choice for general counsel of the National
Labor Relations Board, Arthur Rosenfeld, plans to scale back the use of
the board's statutory authority to petition federal courts to seek
injunctions to halt unfair labor practices, such as mass firings of
workers, a person familiar with the situation says. Businesses have
complained that the NLRB abused that authority during the Clinton
administration.
Mr. Bush's aides say they're merely bringing reason to a Cabinet
agency with a demonstrated penchant for regulatory foolishness. Just
this week, Mr. Findlay notes, senior officials halted an effort within
the Labor Department to pursue potential wage-and-hour and child-labor
violations against a West Virginia hospital using teen-aged "candy
stripers" as volunteers.
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David Cloud, Sarah Lueck, John McKinnon, Yochi Dreazen and John
Fialka contributed to this report.
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Friends In Need
By John Harwood and Kathy Chen
Staff Reporters of The Wall Street Journal
08/03/2001
The Wall Street Journal
A1
(Copyright (c) 2001, Dow Jones & Company, Inc.)
Selected business interests with stakes in President Bush's
deregulation efforts and their donations to Republicans, Democrats and
party committees in 1999-2000.
Republicans Democrats
Industry (in millions) (in millions)
Oil and Gas $26.1 $6.7
Banks, Savings and Loans $17.0 $10.3
Hospitals, HMOs, $10.4 $8.1
Nursing Homes
Telephone Utilities $12.1 $8.6
Electric Utilities $12.5 $6.0
Source: Center for Responsive Politics
Copyright © 2000 Dow Jones & Company, Inc. All Rights Reserved.