Senator KENNEDY. But it is entirely conceivable that there will be a reduction in regulation, and that the process will be actually expedited.

Mr. PASTER. I think that makes sense, and I think the experience with airline deregulation, which the chairman was intermittently involved with, bears this out.

Senator KENNEDY. Thank you very much.

Mr. PASTER. Thank you.

[The prepared statement of Mr. Paster follows:]

PREPARED STATEMENT OF HOWARD G. PASTER

Mr. Chairman, members of the committee, thank you for giving me this opportunity to express the support of the 1.5 million member International Union, UAW, on the revised version of S. 382, the Competition Improvements Act.

I would like, at the outset, to explain briefly the general view with which we approach the broad issue of regulatory reform, an issue that has spawned a great deal of legislation of which the bill under consideration today is but one example. We reject the premise that Government regulation is some pernicious evil that must be eradicated. Quite to the contrary, Government regulation is essential to the health and safety of American consumers and workers who learned long ago that they could not leave their well-being in the hands of corporations for whom profit is the overriding objective.

Moreover, while economic regulation can work against the public interest, we are deeply troubled with the ease with which too many legislators have fallen prey to the simplistic, and erroneous, notion that lessening Government regulation affecting health and safety is a valid means of fighting inflation. There are those, and we know the chairman is not among them, who would subject every regulation of the Environmental Protection Agency, or the Occupational Safety and Health Administration, or the Consumer Product Safety Commission to some risk-benefit equation.

But to do so means assigning hard dollar values to human lives and illness. What is the cost of a child's life lost because an unsafe toy was kept on the market? What is the monetary cost of the death of a worker who is the victim of workplace cancer? How many dollars are we willing to put into the risk-benefit equation if 10,000 elderly people are forced to breathe polluted air that requires them to be confined and perhaps shortens their lives?

These are not idle questions. For as unreasonable as they are, and as absurd as they strike some of us, these questions are being asked too frequently in too many places. Even more distressing is the fact that many who would quickly reject such questions as inhumane and unreasonable, are dealing on the edge of this abyss by toying with the more general, but equally inhumane and unreasonable, questions about the economic cost of health and safety regulation.

We reject, Mr. Chairman, the notion that there is too much health and safety regulation. Indeed, we think there is too little. We further reject efforts, in the name of regulatory reform, which would undermine the health and safety regulations already on the books. Certainly the administration of regulations can be improved, and certainly pointless regulations can be dispensed with. One need only look at the change in direction and emphasis at OSHA in the past 2 years to find an outstanding example of improved regulation with a clearer sense of priorities.

While we oppose improper tampering with health and safety regulation, we do believe that the revised version of S. 382, the bill now before you, does represent a responsible attempt to come to grips with a particular problem associated with economic regulation. I must say, we do not oppose economic regulation per se. For example, we are alined with the chairman in the effort to continue controls on crude oil prices.

But it is also true that in certain instances economic regulation has served as much to protect the regulated industry as it has to protect the consumer. The successful experience with airline deregulation is a good, current example of how the removal of regulation can serve the public. Airline fares are reduced, more people are able to use air travel, and in many locales employment in the airline industry has increased.

Moveover, there is good reason to accept the underlying premise of S. 382 as revised. That is, Government regulation can inhibit competition and in doing so increase the concentration of economic power and leave the consumer at a greater disadvantage in the marketplace.

As we read this bill it simply sets out the principle that economic regulation-as distinct from health and safety regulation-shall take into account the competitive consequences of Federal action with the goal of promoting, rather than deterring, competition. We note as a key part of the bill in section 3(a), that agencies shall take "the least anticompetitive alternative legally and practically available to achieve statutory goals."

Our understanding is that this does not change underlying law which results in Federal regulations. Agencies much continue to pursue the goals set out for them by the Congress. But when those goals can be pursued in a practical way in a manner which does not unduly inhibit competition then certainly that is a fair and reasonable standard to set forth.

Section 4 of the bill logically involves those agencies charged with antitrust enforcement in the economic regulatory process as it relates to the promotion or inhibition of competition. Section 5 continues the chairman's longstanding commitment to help concerned parties take part in litigation in which their members have a legitimate interest.

We do have a question about section 6 of the bill which instructs all agencies to review existing regulation to bring them in compliance with the act. We think it important to do this, but we also think it important to make explicit—perhaps in report language-that the discharge of this mandate not become the excuse for any agency to fall behind in its current regulatory responsibilities.

It will not surprise the committee to know that we have a special concern for regulations governing labor standards. It is our understanding of the bill that it does propose to undermine in any way existing statutes and regulations concerning labor standards. For example, our support of this bill is based on our belief that it would not provide a basis for challenge to minimum wage or equal pay regulations. It would be helpful if the committee report could deal specifically with these and other similar matters which are not properly with the purview of the bill. Mr. Chairman, having set out our general view of regulation and having addressed specifically, if briefly, certain sections of the bill, I would like to conclude my statement with a short, general comment about the broad thrust of this legislation.

The UAW believes that antitrust enforcement in recent years has failed to stem the tide of economic concentration. We support initiatives to improve antitrust enforcement, including legislation in those instances in which the agencies charged with antitrust responsibilities are unable or unwilling to act. One of the ironies of this situation is that Government regulation is itself sometimes the culprit. In its triennial convention in 1977 the UAW adopted a policy resolution on antitrust matters which said, in part: "The UAW urges *** use of the antitrust laws to enforce competition in industries now supposedly regulated but which in reality control the regulating agencies to prop up high prices to gouge consumers and workers."

By imposing a competitive test on economic Federal regulation this bill will help to correct this unfortunate trend. It is for this reason that the International Union, UAW is pleased to endorse and to pledge its support to S. 382 as revised.

Senator KENNEDY. Our next witness is Milton D. Stewart, Chief Counsel for Advocacy of the Small Business Administration, and past president of the National Small Business Association. Mr. Stewart, we are glad to have you back here.

STATEMENT OF MILTON D. STEWART, CHIEF COUNSEL FOR ADVOCACY, SMALL BUSINESS ADMINISTRATION

Mr. STEWART. Mr. Chairman, it is always a privilege to be here. I have a brief statement, which I will dispense with, offering it for the record with your permission, and just make several salient points, if I may.

Mr. STEWART. First and foremost, perhaps the central mission of our Office of Advocacy focuses on a relationship between Federal policy and practice on the one hand, and entrepreneural environment for small business on the other.

It is a hard thing to describe what it is that makes a risktaking entrepreneur or risktaking investor decide to proceed with a hazardous or risky enterprise or not to; but it appears to us, based on our review of Federal policy, and this is not limited to regulation, it includes procurement, it includes tax policy, and it includes a variety of Federal acts and activities.

The cumulative impact of Federal action over the last 40 years has been-we think it is beyond debate any more-has been to truncate the relative growth of the small business sector of the economy. To overcome these adverse Federal policies and practices, one by one is the mission which we, along with Members of the Senate and the House, the President and others are engaged in.

To draw down to the bottom line, our central reason for supporting S. 382 is the fact that we view it as one of the necessary signals for the small business people of the country that Federal regulatory policy will change and will become more reasonable, more sensitive to the need to preserve competition and to avoid anticompetitive regulation.

Let me close in discussing the present state of morale, if you will, in the small business sector by quoting from the forthcoming report by the Batelle Institute on regulation and paperwork and its impact in the State of Washington. This is the result of a study of not just Federal regulation but State and local as well.

Two central conclusions emerged from the study.

First: The time and energy expended by the owner-manager of the small business is the singlemost important impact of Government requirements.

Second: The psychological costs of compliance are in many cases much more important than the actual amount of time and money spent. The psychological cost of compliance goes far beyond the amount of time spent, and may decrease the entrepreneural spirit by giving rise to feelings of frustration, fear, hostility or resignation. As a consequence, businessmen forgo far more opportunities than the apparent time and money spent complying with Government requirements would suggest.

As a final point, Mr. Chairman, it seems to me that one other beacon of hope is reflected in the airline industry. A year ago there were 116 commuter airlines. Today that number has grown to 141.

If we can see the same kind of gradual improvement in the competitive environment industry by industry, I think small business can take heart about the future, and we believe that S. 382 will be a contribution to that goal.

Senator KENNEDY. Mr. Stewart, why is it that competition and the small business interests served by competition have been basically ignored by the Federal agencies?

Mr. STEWART. I am not sure I know the answer to that.

Senator KENNEDY. Would you agree?

Mr. STEWART. Yes; emphatically yes.

Senator KENNEDY. Why do you think that this has been so?

Mr. STEWART. Let us try them one at a time. One element certainly is that when you give an agency a regulatory mission, inevitably what concerns each of us is most important to us, and inevitably you get an excess of zeal. I think of Mr. Justice Brandeis, who warned all young people in Government about it, and I think he was right on target.

Second, as the agency becomes more and more involved with its own internal, almost metaphysical concerns, the narrow issues of regulation, it loses sight of overall impact on the economy as a whole and the regulatory structure.

Finally, inevitably it establishes ongoing relationships with the particular industry or industries that it is regulating, and becomeswell, it is too harsh to say "a captive," but perhaps it accepts the status quo and the trends of status quo more than it should.

Senator KENNEDY. How much consideration do you feel the agencies give to competition?

Mr. STEWART. Mr. Chairman, as a lawyer, I dealt with perhaps five or six Federal regulatory agencies as a regular matter of course. I ran a federally licensed company which was closely regulated by the agency I am now with, as well as by the Securities and Exchange Commission. All I can tell you is that this question is not now raised often enough, and it is a question that ought to be.

I think the statute is needed.

Senator KENNEDY. Finally, we are not interested in delaying the process, we are interested in expediting it. Do you believe that S. 382 could be used to delay the administrative process?

Mr. STEWART. Mr. Chairman, energetic and imaginative lawyers can find ways to screw up any process.

Senator KENNEDY. That applies to Senators as well.

Mr. STEWART. I cannot say that, sir.

Senator KENNEDY. Yes, you can.

Mr. STEWART. I would rather you said it.

But I do think, on balance, that asking this question is much more likely to expedite the regulatory process, because I think it is going to result in increasing the push toward deregulation and increasing reliance on the market, where the market should be relied on.

I cannot help but believe that the cumulative impact will be to facilitate the process.

Senator KENNEDY. Thank you very much.

Mr. STEWART. Thank you.

[The prepared statement of Mr. Stewart follows:]

PREPARED STtatement of MILTON D. STEWART

Mr. Chairman and members of this committee. It is a pleasure to be here today before this committee to discuss the Competition Improvements Act of 1979. My comments today reflect my views as Chief Counsel for Advocacy and not necessarily those of the Small Business Administration or the administration.

How one views the national entrepreneurial environment is a little bit like the old saying about the water glass: is it half full or half empty? The relationship between public policy on the one hand and entrepreneurship and competition on the other hand has been a matter of concern to me for most of my adult life. Without getting into arguments about the significance of specific data, it seems to me to be unexceptionable that the effect of Federal policy on competition and the small business sector of the economy has been negative and anticompetitive.

This is not just the consequence of regulatory policy; it results from changes of credit policies, from procurement policies, from tax policies, from science and technology policies.

This proposal, for that reason alone, has my support: it is a potentially useful contribution to changing the Nation's entrepreneurial climate by laying the basis for a change in Government attitude and hopefully in Government conduct.

What makes a risk taker invest or not invest, a would-be entrepreneur take the plunge in a high risk venture or not take it, a small business person expand into a new market opportunity or not, these are the complex questions without any single answer. Legislation such as proposed by the administration for regulatory reform, antimerger legislation, legislation to stimulate innovation which is expected to come out of the President's domestic policy review, will all help. Such legislation is important since, in recent years the role of Government and Government regulators have loomed larger and larger in the minds of the people involved in the entrepreneurial process. The enactment of this particular legislation will, I believe, be a helpful signal to them of an important change in the Government produced elements that affect the market sector of our economy is occurring.

Through the years I have learned to become somewhat skeptical of rhetoric in support of competition and small business.

In 1953, when the Small Business Act was introduced Senator Thye stated: "The essence of the American economic system of private enterprise is free competition. Only through full and free competition can free markets, free entry into business, and opportunities for the expression and growth of personal initiation and individual judgment be assured. The preservation and expansion of such competition is basic, not only to the economic well-being but to the security of this Nation."

As you can see significant discussion has been paid to the issue of competition and small business. Unfortunately, our Government's actions have not kept up with the rhetoric.

As John Shenefield stated in his testimony, the judicial review section of S. 382 is important to insure that this bill does not become just another piece of rhetoric in our law books.

In evaluating the effect of Government regulations on small business and competition it is difficult to arrive at specific dollar figures. The pattern of economic regulation in regulated industries was established many years ago. For this reason it is difficult to determine precisely the effect a bill such a S. 382 would have.

The only instance in which economic regulations have been removed from an industry is the airlines industry. Even in this situation it is too early to tell what the effect of removing these economic regulations will have. It is clear that one of the important effects has been to stimulate the growth of the small businesses within the airline industry. Commuter airlines have expanded their operations significantly during the first year after deregulation occurred. In addition to the expansion of existing carriers operations, additional new commuter airlines have come into existence. One year ago there were 116 commuter airlines. Today that number has grown to 141. In conversations with the individuals at the Commuters Airline Association of America, they pointed out that the growth had been restrained by their inability to obtain airplanes and equipment.

It seems to me that this proposed legislation highlights the common interest to be served by both small business and antitrust. One of the many Government mysteries I have never been able to solve is why those concerned with antitrust law and those concerned with small business so often must be introduced to one another. We are dealing, after all, with two sides of the same coin: facilitating competition by making it easier for small businesses to be founded, to succeed and to compete and to make it harder for big business-and equally important, big Government to exercise negative anticompetitive influences on the market.

We may not be able to measure precisely the effect of S. 382 or any other pro small business or pro competition legislation but there is one point that I would like to stress-the decline of the small business sector of our economy must be reversed-legislation such as S. 382 is a step in the right direction.

Senator KENNEDY. If any of the witnesses have other suggestions or recommendations, we are going to keep the record open and we will welcome comments.