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Wednesday, September 29, 2004 - Page updated at 12:00 A.M.
Bush's gatekeeper weighs costs, benefits of new regulations
By Alex Fryer
Graham heads an obscure agency in the White House called the Office of Information and Regulatory Affairs (OIRA), which reviews hundreds of federal rules covering everything from the care of monkeys in medical research to smokestack emissions.
Tallying the costs and benefits of proposed regulations, Graham also makes certain that new rules about clean air, habitat protection and watershed restoration reflect the values of President Bush, who nominated him in 2001.
With Bush facing stiff opposition in Congress to his energy and environmental legislation, the White House turned to rule-making to push much of its agenda. And Graham is the man pressing the levers and switching the gears.
Graham is known as a stickler for the bottom line, pressing regulators in the Environmental Protection Agency (EPA) and other departments to explore how each proposed rule affects workers, investors and consumers.
Through rigorous analysis, Graham wants to create "smart" regulation that protects the environment at lower cost. But it is a process fraught with subjectivity.
While it's relatively simple to document how environmental regulation hurts businesses, the value of pristine forests, clean lakes and species protection can't be expressed in dollars. As a result, the ratio between costs and benefits often appears skewed.
And when it comes to actually writing regulation, OIRA has a record of adopting language proposed by industry lobbyists, not environmentalists.
Graham's extensive scholarship on regulatory issues made him a lightening rod even before he moved to Washington, D.C. But he has plenty of supporters, including many Democrats, who say his focus on the costs and benefits of regulation is necessary and fair.
"The easy, kind of sophomoric criticism you'll hear from some of the activists is, 'These guys just look at the money and they don't care about anything else,' " Graham said. "That's not an accurate characterization."
Indeed, even Graham's staunchest critics concede the 47-year-old, who has a doctorate, has been a strong advocate for clean-air and other regulations.
A fan of innovation
It seemed a natural choice for Graham to head Bush's regulatory-affairs office.
Graham taught risk and cost-benefit analysis at the Harvard School of Public Health and in 1990 launched the Harvard Center for Risk Analysis, where scholars research medical technology, food and automotive safety, and environmental protection.
He was known to take an innovative approach to regulation.
For example, Graham once suggested the government promote an arrangement where an oil refinery might be allowed to release more toxic pollutants if it funded AIDS-prevention or violence-prevention programs, since those programs would arguably save more lives in shorter time.
While he was no ideologue or personal friend of Bush's, Graham's Senate confirmation turned out to be the nastiest fight over a regulatory administrator in years.
Supporters heralded his record of advocating regulation when he believed it made sense, instead of opposing all federal rules. Five former OIRA administrators including two under President Clinton signed a letter of support. Dozens of professors from Harvard and other universities, including the University of Washington, signed a letter urging Graham's confirmation.
Another group of professors opposed him, claiming oil, chemical and manufacturing donations to the Harvard Center for Risk Analysis tarnished Graham's research.
In the end, the Senate confirmed Graham 61-37, with both senators from Washington state voting no.
After moving to Washington, D.C., Graham made a point of talking to both business and environmental groups.
William Kovacs, vice president at the U.S. Chamber of Commerce, the nation's largest business federation, which often jousts with regulators, describes a breakfast with Graham as a meeting of the minds.
"It was two people who really agreed on the issues: How do you spend money better, how do you get agencies to respond to real problems instead of political problems," Kovacs said. "He has taken the office into a much more active role. He's made OIRA into a real, live regulatory-review agency."
Costs vs. benefits
The process generally works like this: Agencies such as the EPA develop a regulation, sometimes in consultation with Graham's office. The agency publishes the proposed rule in the Federal Register and sets a comment period. Graham's office reviews any later drafts, and the agency publishes a final rule.
OIRA's main task is to ensure new regulations fit with the president's priorities, and it has used cost-benefit analysis since President Nixon.
In 1993, President Clinton signed an executive order saying agencies must determine a rule's merits by counting costs and benefits as well as considering all factors not measured in dollars.
But that's not always easy.
Consider the Roadless Area Conservation Rule, which Clinton signed just before leaving office.
When it published the rule in January 2001, the U.S. Forest Service detailed enormous benefits, noting 25 percent of animals protected under the Endangered Species Act live in roadless areas. The agency said protecting these forestlands would provide cleaner drinking water and provide areas for hunting and mountain-biking.
But when OIRA listed the roadless rule in a 2002 report to Congress, Graham's office said increases to air, water quality and biodiversity could not be quantified.
Instead, OIRA said benefits of the roadless rule totaled only $219,000 the money not spent on road crews.
On the other side of the equation, OIRA tagged costs at $184 million from lost jobs and the millions of tons of phosphate and coal off-limits to mining companies.
And Graham's money-centric focus bothered some in Congress.
"This shows you can't make public-policy decisions on flawed economic models. Those things have value to my constituents," said Rep. Jay Inslee, D-Bainbridge Island.
Graham said cost-benefit analysis doesn't always dictate White House decisions. Rather, it helps inform policy-makers who must weigh all possible ramifications of regulation.
"The values that you are protecting through sensible regulation of roadless areas include a lot of values that economists are not yet able to quantify in monetary units," Graham said.
"But that's not the rationale for the rule. The people who are making decisions, who have been informed and have been briefed on the issues, know that what's been quantified isn't the primary basis for the decision."
In other words, the roadless rule wasn't proposed because it would save money on construction crews; it was designed to protect wilderness.
And Bush wants governors to have a final say in such decisions, Graham said.
In July, the White House announced it would reverse the Clinton roadless rule, replacing it with a system in which governors could petition the federal government for approval to set aside lands.
Environmentalists say the change would effectively nullify the roadless rule because most governors would be unlikely to go through all the hoops to put forestlands in their states off-limits to development.
Earlier this month the Bush administration postponed a final decision on the rule until after the election.
Graham has long been a proponent of government action in dealing with dirty air, and environmentalists say the Clean Air Nonroad Diesel rule is one of the Bush administration's finest acts.
The rule, announced May 11, requires new pollution controls on diesel engines used in construction, agriculture and mining. According to the EPA, the rule will prevent 12,000 premature deaths; 1 million lost work days; 15,000 heart attacks; and 6,000 asthma-related emergency-room visits by children.
"The off-road diesel rule may be the best evidence that when he is convinced benefits are greater than costs, he will stand up for the proposed rule," said Sally Katzen, former OIRA administrator under Clinton. "His actions were consistent with his rhetoric."
But Katzen still has reservations about how Graham values benefits.
"There remains the question of what it takes to convince John Graham that the benefits exceed the costs. There are different opinions about the value of items not traded in the market, such as health, happiness and life," she said.
Graham said his office has indeed approved regulations even though costs clearly exceeded benefits, citing an EPA rule that sought to protect fish from being sucked into the cooling systems of power plants.
The regulation was expected to cost the power industry $389 million. EPA estimated benefits of $83 million, mostly from adding up the value of future fish catches.
Graham signed off on the rule, and it went into effect in July. The administration decided the intangible benefits to the environment and human health justified the costs, he said.
It was cited in a government report last year as an example of industry appearing to influence rule-making.
Two Democratic senators opposed to Graham's nomination, Richard Durbin of Illinois and Joseph Lieberman of Connecticut, asked the General Accounting Office to investigate how OIRA functioned.
The GAO discovered Graham wanted changes to EPA's power-plant rule similar to those proposed by the electric-power industry. Although environmentalists also met with Graham, his office did not heed their suggestions.
"They were looking at their watches from the beginning of the meeting," said Reed Super, an attorney for Riverkeeper, a New York-based group that focuses on the Hudson River. He met with Graham on Feb. 7, 2002, to discuss power-plant fish kills.
"Graham was civil and the meeting wasn't contentious, but I had the feeling they didn't listen to us at all," Super said.
Riverkeeper and six state attorneys general sued the EPA, contending the new rule doesn't go far enough to protect fish. A federal court decision is expected in 2006.
Operating in public
Graham is credited across the political spectrum with making OIRA much more open than it was under Clinton.
His speeches and meeting schedules are published on OIRA's Web site. His letters to agency officials are also public.
Graham is known for his cordiality and good humor, and he has invited his staunchest critics to lunch, sometimes at the White House cafeteria.
If observers detect arbitrariness in federal regulation, Graham said, they are really seeing value judgments by the Bush administration.
"What appears to be inconsistency may be the result of a policy judgment that qualitative considerations [those that can't be measured in dollars] have differing degrees of importance," Graham said.
Robert Litan, who heads a bipartisan regulatory think tank in Washington, D.C., commends Graham's commitment to cost-benefit analysis, even if it includes a large amount of subjectivity.
But in Washington, subjectivity is another word for politics, and it should come as no surprise that Graham, who serves at the pleasure of the president, carries on his agenda, even if it is couched in reams of numbers and analysis.
"Inevitably, you end up with judgments on these issues," said Litan, director of the AEI-Brookings Joint Center for Regulatory Studies. "Republicans strike a balance at a different place than Democrats."
Alex Fryer: 206-464-8124 or email@example.com
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