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The Regulators Rein Themselves In


Government: REGULATION

THE REGULATORS REIN THEMSELVES IN

Charles Gelman, CEO of Gelman Sciences Inc., based in Ann Arbor, Mich., recently won approval from the Food & Drug Administration for a new line of medical filters in a warp-speed 8 weeks instead of the typical 18 months. David E. Zeldin, director of corporate safety at Harry J. Rashti & Co., a Bayonne (N.J.) importer, just settled a complaint about dusty floors with the Occupational Safety & Health Administration--without a nasty fight.

Two thankful beneficiaries of the GOP's much-trumpeted legislation to gut costly regulation? Not quite. The unlikely heroes in this business-friendly red-tape slashing are the Clinton Administration regulators themselves.

OSHA HELP. Call it anticipatory reform. In case after case, Clinton-run federal agencies are responding to recent GOP attacks on Capitol Hill by quietly rolling back regulations and reining in enforcement. And after years of condemning Washington's ways, business is suddenly cheering. "It was the first glimmer of hope that OSHA was actually trying to help business rather than tearing America apart," marvels Rashti's Zeldin.

The reason for the turnabout: The GOP rout of Congress opened hunting season on regulators. On July 28, Representative Tom DeLay (R-Tex.) compared the EPA to the Gestapo. Days later, Representative David M. McIntosh (R-Ind.) suggested that FDA Commissioner David A. Kessler was killing women. How? McIntosh claimed FDA's ban on some breast implants may be scaring women away from having mammograms.

Harsh words--backed by harsh deeds. On July 31, the House of Representatives upheld a series of riders to EPA's 1996 funding bill, which would gut the agency's ability to enforce antipollution laws. Besides curbing OSHA regulations, both the House and Senate are readying bills that could seriously weaken the FDA's authority. "People are fed up with the federal government and overburdensome regulations," says DeLay.

In some instances, the newfound dereggulatory religion is simply the result of direct congressional pressure. OSHA, for example, is scaling back rules aimed at preventing repetitive-motion injuries, after Congress passed a bill ordering them to steer clear in fiscal 1995.

More often, agency moves have been preemptive. In April, Comptroller of the Currency Eugene A. Ludwig pulled back on a controversial Community Reinvestment Act rule requiring banks to gather race and gender data on small-business loans. That helped to mute howls for more sweeping deregulation. Says Edward L. Hudgins, director of regulatory studies at the Cato Institute: "The Clinton Administration is throwing red meat at its attackers. Their strategy is to buy off the most vocal critics and head off dramatic reform."

The Clintonites take a less Machiavellian view. They note the seeds for reform were sown with Vice-President Al Gore's Reinventing Government initiative long before November's election. And they aren't shying from regulating tobacco and beefing up meat inspection, which they consider crucial to public health--and widely popular.

But even Democrats admit the GOP victory moved the reinvention effort "to the front burner," says one White House official. Before November, recalls EPA's New England Regional Administrator John DeVillars, the agency's watchdogs reveled in nailing companies for trivial violations, such as being a few days late with paperwork. "The election caused the career civil servants to realize that if we didn't change, we risked losing the whole system," DeVillars says.

Now, the penny-ante stuff has become passe. "We're focusing a lot more on real risks," DeVillars says. The agency is asking field investigators to work with small businesses to correct violations, rather than simply hitting them with penalties, recent internal EPA memos show. As a result, civil enforcement actions agencywide are down 33% in the fiscal third quarter of 1995 compared with the year-earlier period.

It's not just enforcement. The Interior Dept. has exempted properties of five acres or less from rules to protect endangered species. EPA also announced it will be more lenient in determining required cleanup levels at Superfund sites. And it's beginning a pilot project that would give companies far greater flexibility in determining how they will comply with pollution rules.

BACKLASH? Likewise, the FDA is allowing more medical devices to reach the market without agency scrutiny and permitting drugmakers to make minor manufacturing changes without lengthy approvals. On Aug. 2, Gore and Clinton promised similar relief at agencies ranging from the U.S. Army Corps of Engineers to the Nuclear Regulatory Commission. Rulemakers such as the EPA "really have taken a major step forward," says Thomas Zosel, manager of environmental initiatives at 3M.

All this zeal has its risks. First, the effort has yet to soothe GOP reg-slashers. "The President can say he's solving these problems, but agencies continue to beat up on people," says Representative McIntosh. And it's provoking a backlash from environmentalists and consumer advocates. "It's a poor strategy to assume that the attack on our environmental laws will be slowed by preemptively gutting them," fumes John Passacantando, director of Ozone Action, a nonprofit group.

It's uncertain if Administration regulators can successfully navigate between the Scylla of the Republican Congress and the Charybdis of the environmentalists and public advocates. But for the moment, many companies are pleasantly surprised that the ferment in Washington has paid a dividend far faster than they ever imagined.

Clinton's Deregulators

As the GOP Congress tries to pass regulatory reform, the Administration's agencies are rushing to roll back regulation on their own:

EPA

-- More lenient rules on Super-fund site cleanup

-- Easing rules for small landowners who want permits to develop wetlands

INTERIOR

-- Exempted owners of five acres or less from provisions of Endangered Species Act

FDA

-- Reduced approval times for drugs and medical devices

-- Allowing drugmakers to make minor changes in manufacturing processes without lengthy approvals

-- Delayed proposed rules, such as one establishing a hot line to report health problems from cosmetics

OSHA

-- Slowed planned regulations on repetitive-motion injuries and tighter standards for construction worker safety

OFFICE OF THE COMPTROLLER

-- Pulled back from requiring banks to gather race and gender data on small-business loans

DATA: BUSINESS WEEKBy John Carey, with Mary Beth Regan, Howard Gleckman, and Susan B. Garland in Washington


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