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+<title> - REINS ACT--PROMOTING JOBS AND EXPANDING FREEDOM BY REDUCING NEEDLESS REGULATIONS</title>
+<body><pre>
+[House Hearing, 112 Congress]
+[From the U.S. Government Publishing Office]
+ REINS ACT--PROMOTING JOBS AND EXPANDING FREEDOM BY REDUCING NEEDLESS
+                              REGULATIONS
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                   SUBCOMMITTEE ON COURTS, COMMERCIAL
+                         AND ADMINISTRATIVE LAW
+                                 OF THE
+                       COMMITTEE ON THE JUDICIARY
+                        HOUSE OF REPRESENTATIVES
+                      ONE HUNDRED TWELFTH CONGRESS
+                             FIRST SESSION
+                               __________
+                            JANUARY 24, 2011
+                               __________
+                            Serial No. 112-7
+                               __________
+         Printed for the use of the Committee on the Judiciary
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+      Available via the World Wide Web: http://judiciary.house.gov
+                  U.S. GOVERNMENT PRINTING OFFICE
+ 63-872 PDF               WASHINGTON : 2011
+-----------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
+area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC
+20402-0001
+                       COMMITTEE ON THE JUDICIARY
+                      LAMAR SMITH, Texas, Chairman
+F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
+    Wisconsin                        HOWARD L. BERMAN, California
+HOWARD COBLE, North Carolina         JERROLD NADLER, New York
+ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT,
+BOB GOODLATTE, Virginia                  Virginia
+DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
+STEVE CHABOT, Ohio                   ZOE LOFGREN, California
+DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
+MIKE PENCE, Indiana                  MAXINE WATERS, California
+J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
+STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
+TRENT FRANKS, Arizona                  Georgia
+LOUIE GOHMERT, Texas                 PEDRO PIERLUISI, Puerto Rico
+JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
+TED POE, Texas                       JUDY CHU, California
+JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
+TOM REED, New York                   LINDA T. SANCHEZ, California
+TIM GRIFFIN, Arkansas                DEBBIE WASSERMAN SCHULTZ, Florida
+TOM MARINO, Pennsylvania
+TREY GOWDY, South Carolina
+DENNIS ROSS, Florida
+SANDY ADAMS, Florida
+BEN QUAYLE, Arizona
+      Sean McLaughlin, Majority Chief of Staff and General Counsel
+       Perry Apelbaum, Minority Staff Director and Chief Counsel
+                                 ------
+       Subcommittee on Courts, Commercial and Administrative Law
+                 HOWARD COBLE, North Carolina, Chairman
+               TREY GOWDY, South Carolina, Vice-Chairman
+ELTON GALLEGLY, California           STEVE COHEN, Tennessee
+TRENT FRANKS, Arizona                HENRY C. ``HANK'' JOHNSON, Jr.,
+TOM REED, New York                     Georgia
+DENNIS ROSS, Florida                 MELVIN L. WATT, North Carolina
+                                     MIKE QUIGLEY, Illinois
+                      Daniel Flores, Chief Counsel
+                      James Park, Minority Counsel
+                            C O N T E N T S
+                              ----------
+                            JANUARY 24, 2011
+                                                                   Page
+                           OPENING STATEMENTS
+The Honorable Howard Coble, a Representative in Congress from the
+  State of North Carolina, and Chairman, Subcommittee on Courts,
+  Commercial and Administrative Law..............................     1
+The Honorable Steve Cohen, a Representative in Congress from the
+  State of Tennessee, and Ranking Member, Subcommittee on Courts,
+  Commercial and Administrative Law..............................     3
+The Honorable Lamar Smith, a Representative in Congress from the
+  State of Texas, and Chairman, Committee on the Judiciary.......     4
+The Honorable John Conyers, Jr., a Representative in Congress
+  from the State of Michigan, and Ranking Member, Committee on
+  the Judiciary..................................................     6
+                               WITNESSES
+The Honorable David McIntosh, Mayer Brown LLP
+  Oral Testimony.................................................    21
+  Prepared Statement.............................................    23
+Jonathan Adler, Professor, Case Western Reserve University School
+  of Law, Director, Center for Business Law and Regulation
+  Oral Testimony.................................................    76
+  Prepared Statement.............................................    78
+Sally Katzen, Visiting Professor, New York University School of
+  Law, Senior Advisor, Podesta Group
+  Oral Testimony.................................................    86
+  Prepared Statement.............................................    88
+          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
+Prepared Statement of the Honorable John Conyers, Jr., a
+  Representative in Congress from the State of Michigan, and
+  Ranking Member, Committee on the Judiciary.....................     8
+Prepared Statement of the Honorable Steve Cohen, a Representative
+  in Congress from the State of Tennessee, and Ranking Member,
+  Subcommittee on Courts, Commercial and Administrative Law......    13
+Prepared Statement of the Honorable Henry C. ``Hank'' Johnson,
+  Jr., a Representative in Congress from the State of Georgia,
+  and Member, Committee on the Judiciary.........................    16
+Prepared Statement of the Honorable Mike Quigley, a
+  Representative in Congress from the State of Illinois, and
+  Member, Subcommittee on Courts, Commercial and Administrative
+  Law............................................................    19
+Prepared Statement of the Honorable Trey Gowdy, a Representative
+  in Congress from the State of South Carolina, and Member,
+  Subcommittee on Courts, Commercial and Administrative Law......   102
+CRS Report submitted by the Honorable John Conyers, Jr., a
+  Representative in Congress from the State of Michigan, and
+  Ranking Member, Committee on the Judiciary.....................   117
+                                APPENDIX
+               Material Submitted for the Hearing Record
+Responses to Post-Hearing Questions from Sally Katzen, Visiting
+  Professor, New York University School of Law, Senior Advisor,
+  Podesta Group..................................................   140
+Report from the Center for Progressive Reform (CPR)..............   142
+ REINS ACT--PROMOTING JOBS AND EXPANDING FREEDOM BY REDUCING NEEDLESS
+                              REGULATIONS
+                              ----------
+                        MONDAY, JANUARY 24, 2011
+              House of Representatives,
+                    Subcommittee on Courts,
+                 Commercial and Administrative Law,
+                                Committee on the Judiciary,
+                                                    Washington, DC.
+    The Subcommittee met, pursuant to notice, at 4 p.m., in
+room 2141, Rayburn House Office Building, the Honorable Howard
+Coble (Chairman of the Subcommittee) presiding.
+    Present: Representatives Coble, Smith, Gowdy, Gallegly,
+Franks, Reed, Ross, Cohen, Conyers, Johnson, Watt, and Quigley.
+    Staff present: (Majority) Daniel Flores, Subcommittee Chief
+Counsel; Olivia Lee, Clerk; and Carol Chodroff, Minority
+Counsel.
+    Mr. Coble. The Subcommittee will come to order. I was going
+to welcome all the new Members to the Subcommittee, but Mr.
+Cohen and I appear to be it. So good to have you on board, Mr.
+Cohen, and Mr. Gowdy on my right.
+    Ground rules, folks. I like to start on time, and I like to
+end on time. I hope that is agreeable with everybody. You are
+familiar perhaps with the 5-minute rule. And the 5-minute rule,
+folks, is not done in any way to frustrate debate but rather to
+facilitate the process. Our jurisdictional bounds are broad,
+indeed, and we will hustle along and do the best we can. So
+when you see that red light appear, that will be your signal
+that your 5 minutes have elapsed. And Mr. Cohen and I will not
+call in the U.S. Marshal on you then, but you need to wrap up.
+The 5-minute rule also applies to Members of the Subcommittee.
+We will try to adhere to that as well.
+    I want to give my opening statement, and I will recognize
+Mr. Cohen for his opening statement. Other opening statements
+will be made part of the record at the conclusion. Is that
+agreeable with everybody?
+    Today marks the first hearing of the newly constituted
+Subcommittee on Courts, Commercial and Administrative Law. And
+I think we are going to have Mr. Smith with us, but he is not
+hereyet. Chairman Smith has provided our Subcommittee with
+jurisdiction over a number of important matters that I hope our
+Subcommittee will address during the 112th Congress.
+    In my view, one of the most important matters is to fine
+tune our regulatory process; hence, the introductory oversight
+hearing on the REINS Act.
+    Many in the private sector have alleged that the Obama
+administration has cast a cloud of regulatory uncertainty over
+some parts of the economy. While it is no secret that our
+economy is still soft, perhaps even dismal, unnecessary or
+unreasonable regulatory burdens will continue to drive business
+investments, in my way of thinking, abroad.
+    Examples of the need for improvement are prevalent in
+virtually every sector of government regulation. For instance,
+the Department of Health and Human Services' implementation of
+President Obama's health care reform, the financial agency's
+implementation of the Dodd-Frank financial reform bill, the
+EPA's campaign against carbon dioxide, the FDA's approach to
+herbicide, and the Federal Communication Commission's drive to
+regulate the Internet and allocate spectrum.
+    I only mention these examples because they are widely
+recognized, and the fact of the matter is that fine-tuning is
+needed across the entire regulatory horizon.
+    Our current regulatory regime has deep historic roots.
+Since the days of the New Deal, and especially during the
+1960's and 1970's, Congress has delegated more and more of its
+legislative authority to Federal agencies. This has been done
+through broad and vaguely stated laws that allow Congress to
+claim credit for addressing problems but leaves it to the
+various agencies to fill in the crucial details through
+regulations. The final risk of the wrong decision thus falls on
+the agencies and, of course, the economy and America's job
+creators. Congress too often escapes both responsibility and
+accountability.
+    The Republican majority that came to Congress in 1994
+attempted to address this problem through the Congressional
+Review Act. That act, you may recall, gave the Congress greater
+tools to disapprove agency regulations that harm the economy,
+destroy jobs, or otherwise were counterproductive. Over its
+history, however, the Congressional Review Act has not
+fulfilled its potential.
+    During the 108th and 109th Congresses, the Subcommittee on
+Commercial and Administrative Law examined ways to improve the
+Congressional Review Act and better assert Congress's authority
+over legislative regulations. One of the leading ideas for
+reform was to amend the Act to preclude regulations from going
+into effect until Congress actually approve them. That is
+precisely what the REINS Act does for the biggest regulations
+Federal agencies issue, those imposing $100 million or more in
+costs on our economy.
+    Today, more than ever, we must consider and enact reforms
+that vindicate Congress's authority over the laws. The REINS
+Act is front and center among those reforms.
+    Before reserving the balance of my time, I would like to
+extend a warm welcome to our former colleague, Congressman
+David McIntosh--it is good to have you back on the Hill--as
+well as the other witnesses.
+    And Mr. Cohen, I said this before our other colleagues came
+in, but it is good to have all Members, Republican and Democrat
+alike, on this Subcommittee. And now I am pleased to recognize
+the distinguished gentleman from Tennessee, Memphis to be
+specific, Mr. Cohen.
+    Mr. Cohen. Thank you, Mr. Chair. And I appreciate that. As
+you know, Tennessee was originally North Carolina, so, in some
+ways, we are colleagues beyond being colleagues here.
+    And I would like to first pay specific attention to, for
+the new Members and others, to my Ranking Member of the
+Committee, the distinguished, the venerable, the honorable, the
+legendary John Conyers. Nice to be with you.
+    And Chairman Smith and all the other Members, I look
+forward to serving with each of you as well, who is not
+legendary yet, but he is honorable and a few of those other
+things that we will incorporate by reference.
+    Mr. Coble. Would the gentleman yield just a moment. I
+didn't realize that Chairman Smith had come in. I didn't mean
+to ignore you, Lamar.
+    Is Mr. Conyers here as well? Good to see you again.
+    Mr. Cohen. I would like to start by offering my
+congratulations to Mr. Coble, who assumed the Chairmanship of
+the Committee. And when I was Chairman, he was as nice as
+anybody was to me. Everybody was nice, but he was particularly
+nice, and I was always appreciative of that.
+    You are a gentleman, and I look forward to working with
+you.
+    Mr. Franks was an outstanding Ranking Member, and we worked
+together nicely, and I look forward to serving with him.
+    I am honored to be working as Ranking Member, although I
+would rather be working as Chairman, but that is this Congress.
+    Today's hearing provides us with the opportunity to debate
+the merits of H.R. 10, the ``Regulations from the Executive In
+Need of Scrutiny Act,'' or REINS. It also gives us a chance to
+discuss the appropriate role of Federal regulations in American
+life, a conversation I suspect we will continue to have in this
+Subcommittee in the 112th Congress.
+    Although they do not explicitly say, proponents of the
+REINS Act appear to believe that almost all regulations are
+bad. All their arguments focus on the purported costs that
+regulations impose on society. Based on this premise, we have
+heard rhetoric about job killing regulation that will stifle
+economic growth and impair personal freedom.
+    What such arguments do not seem to fully appreciate is
+regulations can also benefit the economy by policing reckless
+private-sector behavior that could undermine the Nation's
+economic well-being, and came very, very close to doing it in
+2008. Lack of regulations and the economy of the world was on a
+precipice, pulled off by President Bush and bipartisan Members
+of the Congress in passing the TARP and successive legislation
+with the Stimulus Act. We learned that the hard way in the 2008
+financial crisis and the problems that ensued there from.
+    We can look back to the Great Depression, when there was
+even more independence from regulations and lack of regulation,
+and see what followed there, the Great Depression.
+    Regulations can facilitate economic activity by providing
+clarity for regulated industries where the applicable statutory
+language may be too broad or too vague and lead to unnecessary
+confusion or even litigation.
+    Regulations can also serve societal values that may
+outweigh economic growth.
+    Most importantly, regulations help protect the health and
+safety of everyday Americans, including our children, our
+neighbors, our colleagues, our grandparents, and ourselves and
+the public at large.
+    The fact is that Federal regulations help ensure the safety
+of the food that we eat, the air that we breathe, the water
+that we drink, the products we buy, the medications we use, the
+cars we drive, the planes we fly in, and the places we work.
+Indeed, most Americans are able to take for granted the safety
+of these things assured because of the existence of Federal
+regulations.
+    The REINS Act threatens to make it harder for such
+beneficial regulations to be implemented. Under the Act,
+Congress must approve a major rule, one having an economic
+impact of $100 million or more, by passing a joint resolution
+of approval through both Houses of Congress within 90--70
+legislative days after the rule is submitted to Congress. The
+President must then sign the joint resolution of approval
+before the rule can go into effect.
+    At the most practical level, I question whether the REINS
+Act could work. I have been in Congress long enough to
+understand that the crush of business before us will more often
+than not prevent us from giving due consideration and approval
+to the many rules that may be beneficial and even ultimately
+enjoy widespread support if we were to implement the REINS Act.
+    As with the Congressional Review Act, the underlying
+statute that the REINS Act seeks to amend, this idea may seem
+better in the abstract than it will be in practice.
+    Of course, I am not ready to say the REINS Act is a good
+idea even in the abstract. While I appreciate the attempt to
+reassert some congressional control over agency rulemaking,
+there are separation of powers that I think were spoken to
+Members of Congress about recently, and Justice Scalia I think
+led that talk. And there could certainly be constitutional
+objections with separation of powers to the REINS Act, which we
+will hear from our witnesses. There is a role for us. There is
+a role for the executive. There is a role for the judiciary.
+    I look forward to our witnesses testimony. I look forward
+to working with Chairman Coble and my other colleagues on the
+Subcommittee for hopefully a meaningful 112th Congress.
+    I yield back the remainder of my time.
+    Mr. Coble. Mr. Cohen, I thank you.
+    And I thank you as well for your generous remarks at the
+opening. I appreciate that.
+    Statements of all Members will be made a part of the
+record, without objection.
+    And I am told that Mr. Smith and Mr. Conyers would like to
+make opening statements, and I recognize the distinguished
+gentleman from Texas, the Chairman of the full Committee, Mr.
+Smith.
+    Mr. Smith. Thank you, Mr. Chairman.
+    And, Mr. Chairman, thank you for chairing this particular
+hearing, which I think is going to be one of the most important
+of the year.
+    As you said, I also welcome our former colleague David
+McIntosh.
+    And, David, I hope we get to talk a little bit more later
+on, but appreciate your being here, too.
+    Mr. Chairman, the American people in November voted for
+real change in Washington. One change they want is to stop the
+flood of regulations that cost jobs and smothers job creation.
+Yet, another is to make Washington and Congress more
+accountable. The REINS Act makes that change a reality.
+    Unelected Federal officials for too long have imposed huge
+costs on the economy and the American people through burdensome
+regulations. Today, these regulatory costs are estimated to be
+a nearly incomprehensible $1.75 trillion dollars, roughly
+$16,000 per household.
+    Because the officials who authorize these regulations are
+not elected, they cannot be held accountable by the American
+people. The REINS Act reins in the costly overreach of Federal
+agencies that stifles job creation and slows economic growth.
+It restores the authority to impose regulations to those who
+are accountable to the voters, their elected Representatives in
+Congress.
+    The Obama administration has under consideration at least
+183 regulations that each would impose costs of $100 million or
+more on the economy. And when businesses have to spend these
+vast sums to comply with these massive regulations, they have
+less money to invest to stay competitive in the global economy
+and to hire new employees. These costs get passed on to the
+American consumers. In effect, these regulations amount to
+stiff but unseen taxes on every American.
+    Last week, in a new Executive Order, President Obama
+reiterated the existing authority of agencies to cull outdated
+rules from the books and consider impacts on jobs when
+regulations are written. This order sounded encouraging but
+added little to the rules that already guide the process of
+regulations. In the Executive Order, ``distributive impacts''
+and ``equity'' are specifically identified among benefits to be
+maximized. Job creation is not.
+    The Executive Order is specifically written not to include
+regulations issued to implement the Administration's health
+care legislation, and it carves out independent agencies
+charged to implement the Dodd-Frank financial reform
+legislation. And it won't halt the Environmental Protection
+Agency's drive to exercise authority it was never granted. So
+the most burdensome and costly regulations are exempted.
+    The Executive Order, I hope not, may have been all style
+and no substance. Until the Executive Order produces real
+results, it is just a string of empty words. We must watch what
+the Administration does, not what it says.
+    In 1994, Congress passed the Congressional Review Act to
+reassert Congress's authority over the relentless regulation of
+the Federal Government. The act has been used just one time to
+disapprove of regulation. The regulatory tide continues and
+rises even higher. The REINS Act is needed to reduce the cost
+of the flood of regulations, free up businesses to create jobs,
+and make the Federal Government more accountable. Thank you,
+Mr. Chairman.
+    Mr. Chairman, before I yield back entirely, I would like to
+recognize my colleague sitting back of the room, Geoff Davis,
+who has been absolutely instrumental in promoting, advancing,
+and writing this legislation that we are discussing today.
+    Mr. Coble. I thank the gentleman.
+    The Chair is pleased to recognize the distinguished
+gentleman from Michigan, Mr. Conyers.
+    Mr. Conyers. Thank you, Mr. Coble.
+    I join in welcoming our former colleague, Mr. McIntosh,
+back here. It is very important. And I ask unanimous consent
+that the author of the bill, Representative Davis, come
+forward. I think he should be able to make a couple comments
+about the bill. I would welcome his sitting at the table. Since
+there are only three people there anyway, there is plenty of
+room.
+    Mr. Coble. Mr. Conyers, I would be pleased indeed to have
+Mr. Davis come forward. I don't believe, though, he would be
+eligible to comment. But we would be glad for him to come
+forward to the table if he would like.
+    Mr. Conyers. You say he can't comment on his own bill in
+the Judiciary Committee, the keeper of the Constitution?
+    Mr. Coble. Well, Mr. Conyers, he was not called as a
+witness. And that is why I made that statement.
+    Mr. Conyers. Okay.
+    Well, I have got a few questions I would like to ask him
+after the hearing, then, if I can. I will be looking forward to
+doing that.
+    I have got a statement that I will put in the record so we
+can get to our witnesses. But the most important part of my
+statement is that I think we have a constitutional problem on
+our hands, and our former colleague alluded to it himself in
+his statement. And it is found in article II, section 1, that I
+refer all of the distinguished lawyers on this Committee to.
+And I am sure we will have enough time to go into this.
+    The second consideration I would like us to keep in mind as
+we go through this important hearing is that the REINS Act may
+not be tailored to the problems that it is supposed to address.
+We have got some big problems with whether this is feasible.
+The feasibility of this act is--well, let's put it like this.
+This would affect every law on the books. It is not
+prospective, but it would involve every law that is on the
+books currently.
+    Now, I don't want to suggest that the Congress isn't up to
+its work, but do you know how much time that that would take to
+go through all of the laws to get them, the regulations to the
+laws, okayed by the House and the other body, as we delicately
+refer to them? It doesn't seem very probable that that could
+happen.
+    So when you consider the fact that we don't have the author
+of the bill testifying--and we are glad he is here, of course--
+but we also don't have the Administration testifying. Why isn't
+somebody from the Administration here? I mean, how can we be
+doing this? And I have been told by staff that we are going to
+try to report this bill next week sometime.
+    So, Chairman Coble, I would like to, with all due respect,
+ask an opportunity to discuss with you the possibility of an
+additional hearing on this matter.
+    Mr. Coble. Well, if the gentleman would yield. This is an
+oversight hearing, and there will be a legislative hearing
+subsequently.
+    Mr. Conyers. Okay. Well, that is consoling. I am glad to
+find out.
+    Now, this is a great new process of order. We do the
+oversight hearing first, and then we have a hearing on the
+bill. That makes a lot of sense. Why don't we have a hearing on
+the bill first? Oh, we are oversighting the condition that has
+caused the bill to be created. Is that right?
+    Mr. Coble. This is the oversight hearing. As I say, the
+legislative hearing will be scheduled.
+    Mr. Conyers. Okay. All right. Well, then I don't have to
+ask for another hearing. There is going to be another hearing
+on the bill. So I am glad to know that, because I have got a
+witness or two in mind that I would like to have partake with
+all the other distinguished friends of ours that are here with
+us today.
+    So I thank you very much, Chairman Coble. And I yield back
+the balance of my time and ask my statement be included in the
+record.
+    [The prepared statement of Mr. Conyers follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Coble. And all statements of the Members of the
+Subcommittee will be made a part of the record, without
+objection.
+    [The prepared statement of Mr. Cohen follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    [The prepared statement of Mr. Johnson follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    [The prepared statement of Mr. Quigley follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Coble. We are pleased to have our panel of three
+witnesses with us today.
+    As has been mentioned previously, Mr. McIntosh, it is good
+to have you back on the Hill. Mr. McIntosh now practices at
+Mayer Brown LLP in Washington focusing on issues before
+Congress and the executive branch. He is a graduate of the
+University of Chicago School of Law and a cum laude graduate of
+Yale University.
+    Professor Jonathan Adler teaches at the Case Western
+Reserve School of Law, where he is the director of Case Western
+Center for Business Law and Regulation.
+    Professor Sally Katzen is a visiting professor at New York
+University School of Law, and Professor Katzen also serves as
+senior adviser to the Podesta Group.
+    It is good to have each of you with us.
+    And we will start with Mr. McIntosh, and we recognize you,
+sir, for 5 minutes.
+          TESTIMONY OF THE HONORABLE DAVID McINTOSH,
+                        MAYER BROWN LLP
+    Mr. McIntosh. Thank you. It is a pleasure to be back.
+    And thank you, Mr. Cohen and Mr. Conyers, for your remarks.
+    Let me commend the Committee for taking up this question in
+the oversight hearing of the regulatory process and the urgency
+for looking at, are there ways of making it work better to
+reduce the cost of regulations?
+    And I want to commend Representative Davis for his work in
+introducing the REINS Act.
+    When I was a Member, the Speaker asked me to Chair a
+Subcommittee on oversight just on regulations in the Government
+Reform Committee, and we looked at a lot of the different
+regulatory programs, looked at the overall costs on the
+economy. And I have to say, as I was preparing for the
+testimony today after I received the invitation, I was startled
+at the magnitude of the cost of Federal regulations: $1.75
+trillion annually of costs imposed on the economy, about
+$15,000 per household; and, in particular, on jobs, where for
+large businesses, it costs $7,700 per employee to hire a new
+employee to follow the regulatory dictates of the various
+Federal programs. And for small businesses, it is even more. It
+is over $10,000 per employee.
+    As Mr. Cohen pointed out, those are the costs. You need to
+look at the benefits of regulations when you are making policy
+decisions, and Congress does that as it passes the laws, and
+the agencies are required to do that under longstanding
+executive orders. But the problem that I see that has happened,
+and we worked on the Congressional Review Act as a way of
+addressing that, is that balancing act of the particular type
+of mandatory requirements that get set in a regulation versus
+the benefits doesn't come back to Congress for review once the
+legislation has been enacted and the regulatory agency has been
+empowered to act.
+    We passed in 1995 the Congressional Review Act as one way
+to increase that formally, but as was pointed out earlier, it
+has only been used one time. And it is difficult for the
+political configuration to work where typically you have got to
+have a resolution of disapproval go through both the House and
+the Senate and signed by the President. I think the only time
+it did work was when President Clinton's administration
+proposed a rule and Congress acted and presented a bill to
+President Bush about that regulation. And so you saw the
+political baton being handed from one party to the other and
+willingness for Congress and the President to act.
+    The REINS Act strikes me as an excellent way of really
+strengthening that effort. It is not applied to all
+regulations. It is carefully tailored to major regulations that
+have a significant and major impact on the economy. It, in many
+ways, addresses some of the constitutional questions that come
+up from time to time in the various regulatory programs;
+specifically, whether Congress has delegated too much authority
+to the regulatory agency and needs to retain some of that
+authority in the legislative branch in order to perform its
+article I duties.
+    And also, as I point out in the testimony, there are some
+enhancements for Presidential authority under article II that
+Mr. Conyers mentioned, article II, section 1, where you have a
+unified Executive, because the bill applies to both regular
+agencies in the executive branch but also the so-called
+independent agencies, which the President would have some
+greater authority over as a result of the REINS Act.
+    It is also carefully tailored to fit into what this
+Committee is an expert at, and that is thinking about the
+processes that should be used for Federal regulations. It
+merely says Congress is going to withhold part of its
+delegation and gives itself an option to approve the final
+result before that has the force of law. It is an addition to
+the Administrative Procedures Act and carefully written to be
+narrowly tailored to fit into that procedural change. The
+parties still have their rights under the Administrative
+Procedures Act for other problems that may come up.
+    So I commend the Committee for taking this up. I urge
+Congress to favorably consider the REINS Act and will be glad
+to answer any questions when you need me to.
+    [The prepared statement of Mr. McIntosh follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Coble. Mr. Adler.
+ TESTIMONY OF JONATHAN ADLER, PROFESSOR, CASE WESTERN RESERVE
+UNIVERSITY SCHOOL OF LAW, DIRECTOR, CENTER FOR BUSINESS LAW AND
+                           REGULATION
+    Mr. Adler. I thank you, Mr. Chairman and Members of the
+Subcommittee, for the invitation to testify today. I appreciate
+the opportunity to appear before this Subcommittee to discuss
+measures Congress may take to enhance regulatory
+accountability.
+    This is a tremendously important issue. Federal regulation
+has been accumulating at a rapid pace for decades. In 2009
+alone, Federal agencies finalized over 3,500 new Federal
+regulations.
+    The growth of Federal regulation has imposed significant
+costs on American consumers and businesses. According to
+estimates, as has been mentioned several times already, the
+total cost of Federal regulation exceeds $1 trillion and
+approaches $2 trillion per year. This is substantially more
+than Americans pay each year in individual income tax.
+    Insofar as regulations impose a substantial cost, they
+operate like a hidden tax. Just like taxes, regulations may be
+necessary. They may be important to address public ills or
+provide public benefits, and these benefits may be important,
+and it may be worthwhile to have many of these regulations. But
+that doesn't mean that they are free.
+    The fact that regulations, like taxes, can both impose
+substantial costs and generate substantial benefits makes it
+that much more important that there be political accountability
+for Federal regulatory decisions.
+    The increase in the scope of Federal regulation has been
+facilitated by the legislative practice of delegating
+substantial amounts of regulatory authority and policy
+discretion to administrative agencies. All administrative
+agency authority to issue regulations comes from Congress. Such
+delegation may be expedient or even necessary at times, but it
+also has costs. Excessive delegation can undermine political
+accountability for regulatory decisions and allow regulatory
+agencies to adopt policies that do not align with congressional
+intent or public concern.
+    All too often, Federal regulatory agencies use their
+statutory authority to pursue policies that are unpopular or
+unwarranted, and all too often, Congress is unable or unwilling
+to do something about it.
+    This problem is magnified by the fact that agencies are
+often exercising authority granted years, if not decades, ago.
+Take one example that has certainly been discussed already
+today: The EPA is currently implementing regulations to control
+greenhouse gases under the Clean Air Act, even though Congress
+has never explicitly voted to support such regulation. Rather,
+the EPA is utilizing authority enacted decades ago. The Clean
+Air Act's basic architecture was enacted in 1970, and the Act
+has been not significantly modified since 1990. If greenhouse
+gas regulation is warranted, this is a decision that should be
+made by Congress, not an executive agency acting alone.
+    The REINS Act offers a promising mechanism for disciplining
+Federal regulatory agencies and enhancing congressional
+accountability for Federal regulatory decisions. Requiring
+congressional approval before economically significant rules
+may take effect ensures that Congress takes responsibility for
+that handful of regulations, usually only several dozen per
+year, that impose major costs and hopefully also provide major
+economic benefits.
+    Adopting an expedited legislative process much like that
+which is used for Fast Track Trade Authority, ensures
+transparency and prevents a congressional review process from
+unduly delaying needed regulatory initiative. Such an approach
+can enhance political accountability without sacrificing the
+benefits of agency expertise and specialization. Requiring
+regulation to be approved by a joint resolution that will be
+presented to the President also satisfies the constitutional
+requirements of bicameralism and presentment.
+    The central provisions of the REINS Act is similar to a
+proposal made by then Judge Stephen Breyer in a 1984 lecture.
+He noted that a congressional authorization requirement is a
+constitutional way to replicate the function of a one-House
+legislative veto. Requiring congressional approval for the
+adoption of new regulatory initiatives, as Breyer noted,
+imposes on Congress a degree of visible responsibility.
+    The REINS Act provides a means of curbing excessive or
+unwarranted regulation, but it is not an obstacle to needed
+regulatory measures supported by the public. If the agencies
+are generally discharging their obligations in a sensible
+manner, the REINS Act will have little effect. If the public
+supports specific regulatory initiatives, the Act will not
+stand in the way. Indeed, it would enhance the legitimacy of
+those regulations Congress approves by making it clear that
+such initiatives command the support of both the Legislative
+and the executive branches. Above all else, the REINS Act
+provides a means of enhancing political accountability for
+regulatory decisions.
+    Thank you again for the invitation to testify. And I am
+certainly open to any questions you may have.
+    [The prepared statement of Mr. Adler follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Coble. And you beat the red light being illuminated,
+Professor. I commend you for that.
+    Professor Katzen, you are recognized for 5 minutes.
+    TESTIMONY OF SALLY KATZEN, VISITING PROFESSOR, NEW YORK
+    UNIVERSITY SCHOOL OF LAW, SENIOR ADVISOR, PODESTA GROUP
+    Ms. Katzen. Thank you Chairman Coble, Ranking Member Cohen,
+Members of the Subcommittee, I appreciate the opportunity to
+testify today.
+    As is clear from my written statement, I am not a fan of
+H.R. 10.
+    It is presented as necessary and desirable to combat an
+out-of-control regulatory process, but the bill, in my view, is
+not tailored to the problem that it is intending to solve. It
+is not well-founded, and it will have serious adverse
+unintended consequences, including fundamentally changing our
+constitutional structure of government.
+    Now, we have had heard a lot this afternoon about the costs
+of regulation. Everyone is citing $1.75 trillion, which is the
+high end of an extremely controversial estimate. Very few have
+talked about the benefits in monetized form.
+    As someone who does cost-benefit analysis, and I was a
+former administrator of OIRA during the Clinton administration,
+you look at both sides of the equation. And OMB, during both
+the Obama administration and the Bush administration, filed
+reports to Congress in which it quantified and monetized the
+costs and the benefits, and consistently over time, the
+monetized benefits exceeded the costs by a substantial amount,
+consistently producing net benefits for our economy and our
+society. We cut back the rules, we lose the benefits.
+    Second, not all rules, not even all major rules, are alike.
+H.R. 10, in its infinite wisdom, exempts the migratory bird
+quota rule, because without that rule, which is a major rule,
+you can't shoot the birds as they fly to and from Canada. But
+there are lots of other rules that industry, the regulated
+entities, want and need, rules that provide guidance, rules
+that provide predictability or certainty for their operation. I
+give in my written statement a number of these.
+    There are rules that give life to programs, programs like
+agricultural subsidies, small business loan guarantees, or
+medical reimbursement. Without the eligibility and
+accountability provisions, which come in the form of rules,
+major rules, you don't have a program, even though Congress has
+authorized it or modified it. No rules, no program.s
+    Other major rules may be good because they reduce burdens.
+The OSHA rule, the infamous OSHA that everybody scorns, passed
+a rule on cranes and derricks which reduced burdens. It
+minimized the costs. Industry had asked OSHA for a negotiated
+rulemaking and supported the clarification. Yet all of these
+rules would be caught by the H.R. 10 net.
+    Now, the supporters say, as Mr. Adler did, well, there
+won't be any effect. They will all go through. With respect,
+our experience during the 111th Congress at least with the
+Senate suggests that it is not easy. The drafters of H.R. 10
+changed H.R. 3765, its predecessor, from allowing 10 hours of
+debate on the debatable issues to 2 hours of debate. But you
+still have a quorum call. You still have the vote, and you have
+nondebatable motions, which easily could exceed 4 to 5 hours.
+    For the 65 to 95 major rules each year, the Senate is not
+going to find that time. It has been unable, with due respect,
+to find blocks of time to process nominations of Administration
+officials or even judges. And so the result is that good rules,
+meritorious rules, important rules, will not take effect even
+though months, in fact years, have been spent with enormous
+resources devoted to sorting out the science and technical
+difficulties, with public participation, with analyses of all
+sorts of issues, with numerous checks throughout the agency,
+with numerous checks throughout the Administration, and subject
+to judicial review.
+    What happens if the Senate doesn't get to them? Is all the
+time and effort and resources to go for naught? The same rule
+cannot be modified once it is final agency action without
+starting a rulemaking process over again. To say there is no
+effect is not to understand the administrative process.
+    At a minimum, H.R. 10 introduces additional delay and
+uncertainty to an already lengthy and complicated process.
+    And, finally, for the reasons I set forth in my paper, I
+believe there are serious constitutional issues that are raised
+that fundamentally challenge the separation of powers,
+principles our Founding Fathers incorporated in the
+Constitution.
+    I sketch out some of the arguments. I hear people referring
+to Justice Breyer's speech. Since 1983 in his response to
+Chadha, there has been a lot of law in the Supreme Court. And
+the Morrison v. Olson test is really critical.
+    I know that I have only 5 minutes. My light is red. I thank
+you, Mr. Chairman, but I do hope somebody will pursue this
+during the questions so we can look at some of the existing law
+and practice in this field. Thank you very much.
+    [The prepared statement of Ms. Katzen follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Coble. I thank the witnesses for their testimony.
+    We will now have Members questioning the witnesses, and we
+will apply the 5-minute rule to ourselves as well.
+    I recognize myself for 5 minutes.
+    Mr. McIntosh, in your view, what current regulatory efforts
+most highlight the need for reforms like those in the REINS Act
+and why?
+    Mr. McIntosh. One, Mr. Adler mentioned the regulation of
+carbon dioxide. And my memory there was Mr. Dingell and I tried
+to present to the previous EPAs the full legislative history of
+the Clean Air Act amendment that made it very clear carbon was
+not to be regulated. And there was a lot of back and forth, and
+ultimately, the courts have forced their hand. But, to me, that
+shows an example of where, if Congress had a procedure in
+place, they could reassert that intent, even when the courts
+are driving the agencyin a direction that perhaps the agency
+itself wasn't initially intending to go down.
+    A second one would be the net neutrality regulations that
+the FCC has proposed. I think there will be a lot of litigation
+about the agency exceeding its statutory authority. I think if
+Congress had a procedure in place where they could easily pass
+that bill, and I think you could get bipartisan support for a
+bill nullifying that regulation under the REINS Act procedure,
+I think that would save a lot of time and expense and
+uncertainty in the private sector as that litigation ultimately
+goes forward. And I think, and in talking to my partners who
+specialize in the FCC Act, that that very likely could be
+thrown out, that it once again would be a great example of how
+Congress could effectively ensure there is economic progress
+that is made by paying attention to and having a part to play
+in that regulation.
+    Mr. Coble. I thank you, sir.
+    Professor Adler, in improving upon the Congressional Review
+Act, is not requiring Congress to approve at least some agency
+rules the next logical step? And in taking that step, what are
+the keys to ensuring that the REINS Act or any similar reform
+remains constitutional under the rule of INS v. Chadha?
+    Mr. Adler. I do think it is the next logical step. I think
+a mechanism that forces Congress to actually say yea or nay to
+substantial regulatory proposal is the next logical step to
+ensure that there is political accountability for major
+regulatory decisions.
+    In terms of the constitutional questions, I think INS v.
+Chadha is very clear that all that is required is bicameral
+presentment. The Supreme Court has said explicitly time and
+again that it is axiomatic, that is their word, that all
+authority for a Federal agency to adopt legislative type
+regulation comes from Congress, and that agencies have no such
+authority absent congressional enactment. So, unlike a case
+like Morrison v. Olson, where you are dealing with enforcement
+authority or arguably, at least in some context, there is some
+residual of inherent executive authority or some inherent
+authority that executive agencies may have, there is no
+inherent authority in any Federal agency to issue regulatory
+type rules absent a congressional delegation.
+    And if Congress wants to delegate less, if Congress wants
+to put conditions on the exercise of that delegated authority,
+it surely can. And not only did then Judge Breyer note that in
+his 1984 lecture or Larry Tribe, the noted constitutional law
+professor at Harvard who was, until very recently, an official
+in the Obama Justice Department, who likewise said that a
+requirement of this sort would be purely constitutional.
+    The last point I will just make very quickly, Mr. Chairman,
+is that we have seen this already in areas that are far more
+sensitive in regulation, in the trade context, using this sort
+of process for Fast Track Trade Authority is arguably a far
+more--a far greater intrusion on executive authority than
+anything regarding domestic regulation because trade implicates
+the Foreign Affairs Authority. And I don't think many people
+argue that Fast Track Trade Authority----
+    Mr. Coble. I want to kind of beat the red light with
+Professor Katzen, if I may.
+    Pardon me for cutting you off, Mr. Adler.
+    Professor Katzen, you indicate that executive orders
+already constrain agency discretion to promulgate too many
+rules. But those orders haven't prevented a flood of
+regulation, and they can be withdrawn by the President, can
+they not?
+    Ms. Katzen. Mr. Chairman, an executive order can be
+withdrawn by the President or his successor. But 12866 has been
+in existence since 1993, September 1993. And while there may be
+a flood, in your terms, of rules that have been issued, as I
+said, OMB has documented, during the Bush administration as
+well, that the benefits exceed the costs consistently over
+time.
+    And I would just mention that Mr. Smith mentioned last week
+President Obama reaffirmed the Executive Order in his own
+Executive Order. And in fact, the very first sentence says
+that, in order to promote the public health, safety, and the
+environment while protecting economic growth, innovation, and
+job creation--it was the first sentence of his Executive Order.
+So I think the record should be clear.
+    Mr. Coble. My time has expired.
+    I recognize the distinguished gentleman from Tennessee, Mr.
+Cohen.
+    Mr. Cohen. Thank you, Mr. Chairman. I appreciate it.
+    Let me ask one question. I may not understand this fully.
+As I understand it, Mr. Davis introduced this in the 111th and
+the 112th Congress. Was it introduced, either to your knowledge
+or to anybody's knowledge, before that?
+    Ms. Katzen. Last year as H.R. 30765.
+    Mr. Cohen. In the 111th. But before the 111th, was it
+introduced?
+    Was it, Mr. Adler?
+    Mr. Adler. I don't know if it is the exact same language,
+but similar types proposals have been proposed at various
+times.
+    Mr. Cohen. That required a positive approval by the
+Congress?
+    Mr. Adler. Yes.
+    Mr. Cohen. When?
+    Mr. Adler. In the 1984 article that----
+    Mr. Cohen. Forget 1984. Let's come back to recent history.
+    Mr. Adler. I don't know, prior to last Congress, when the
+last time such a proposal had been introduced. But I know then
+Congressman Nick Smith from Michigan had an article about
+legislation.
+    Mr. Cohen. When was that?
+    Mr. Adler. I want to say 1996, maybe 1997. I am not exactly
+sure.
+    Mr. Cohen. And how about you, Mr. McIntosh? Do you know of
+anything?
+    Mr. McIntosh. I am not aware of----
+    Mr. Cohen. So, basically, during the Bush years, it was all
+like wonderful, and nobody even thought about this, and the
+executive authority was great, and we didn't need this. It is
+only since Mr. Obama was elected President that we need to do
+this. That seems to be the situation. For 8 years, it was
+wonderful with Mr. Bush, and the executive did everything
+great.
+    Let me ask you this question. You said--I think it was Mr.
+Adler--you said this isn't going to present a problem, that
+Congress can do it. Do you understand in the Senate that they
+have held up like 50 or 60 judges? And you know--what is it
+called? A blue slip? Do you know what a blue slip is? Can you
+imagine the Senators? I mean, that is the last ``don't ask,
+don't tell.'' You don't ask what you are going to get for it,
+and you don't tell what you get for your blue slip. They still
+have that in the Senate. How is that going to work? All these
+regulations, they do a blue slip. I need a park in my district.
+Done. Don't you think that is going to invite basically what I
+would think some nefarious type--one Senator can hold it up.
+    Mr. Adler, is that right? One Senator under the rules we
+know today can hold up appointments, can hold up rules and
+regulations?
+    Mr. Adler. Yes. Under the way the rules are typically
+applied, they can. But blue slips are a courtesy afforded to
+home State Senators for nominations. They are not applied to
+legislation. And my read of the bill would not allow holds of
+joint resolutions----
+    Mr. Cohen. Mr. Adler, are you suggesting that we can write
+a bill over here that is going to restrict or change the Senate
+rules?
+    Mr. Adler. I think that if the House and the Senate both
+passed a bill that is signed into law by the President that
+codifies changes to the rules for both Chambers, as has been
+done for the Base Closure Commission, for the Fast Track Trade
+Authority, for----
+    Mr. Cohen. You understand that one Senator can hold up a
+bill?
+    Mr. Adler. If the rules allow for it, yes. But I also know
+that there are probably about a dozen examples of the House and
+Senate passing legislation limiting the rules to prevent those
+sorts of holds by limiting debate and by requiring votes to
+occur on a scheduled basis. And the two most prominent examples
+are with the Base Closures Commission and with the Fast Track
+Trade Authority.
+    Mr. Cohen. Thank you, sir.
+    Ms. Katzen, let me ask you a question. You were here when
+we read the Constitution. Did you watch us read the
+Constitution from the floor of the well?
+    Ms. Katzen. Actually, I did.
+    Mr. Cohen. You did.
+    And did you hear--I don't know who read it; I am sure it
+was somebody--the article II, section 1, something about all
+power being vested in the executive to carry out the laws. Tell
+us a little primer of what that means about the executive. And
+can they have the ability to execute our laws without rules?
+Could they do it without having any rules?
+    Ms. Katzen. I think that is a serious problem, because
+section 1 of article II vests all executive power in the
+President. That power includes the power to take care that the
+laws be faithfully executed. That is a quote from the
+Constitution. That means that when Congress passes the law, it
+is up to the President and the subsequent President and the
+subsequent President after that, whether they agreed with that
+law or not, to carry out the law.
+    Now, for over a century, administrative agencies have been
+implementing or carrying out the law by issuing regulations.
+That is how it is done. And so for that reason, I believe that
+an attempt by Congress to strip the President of that authority
+with respect to major rules is tantamount to an act of
+Congress--I am using Chief Justice Rehnquist's words from
+Morrison v. Olson--of one branch self-aggrandizing at the
+expense of another branch. Or, again using Chief Justice
+Rehnquist's words, an act of Congress which would impermissibly
+interfere with the President's exercise of his constitutionally
+appointed functions. These are serious questions.
+    I wouldn't be so presumptuous as to say that I know how the
+Supreme Court would rule, but if they want to invoke Justice
+Breyer, I would refer them respectfully to Justice Scalia as
+well, who has been, among all the Justices, the guardian of the
+President's powers.
+    Mr. Cohen. Thank you.
+    Mr. Chairman, I yield back the remainder of my time beyond
+the red light.
+    Mr. Coble. You didn't violate it too badly.
+    The Chair recognizes the gentleman from South Carolina, Mr.
+Gowdy.
+    Mr. Gowdy. Thank you, Mr. Chairman.
+    Mr. Chairman, I would like to make my opening statement be
+part of the record, with your consent.
+    I want to thank all three of our panelists.
+    Mr. McIntosh, I will start with you.
+    Mr. Coble. Without objection.
+    [The prepared statement of Mr. Gowdy follows:]
+  Prepared Statement of the Honorable Trey Gowdy, a Representative in
+Congress from the State of South Carolina, and Member, Subcommittee on
+               Courts, Commercial and Administrative Law
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Gowdy. Thank you, Mr. Chairman.
+    What, in your judgment, is the proper balance between the
+executive branch and the legislative branch when it comes to
+rulemaking and enforcement?
+    Mr. McIntosh. Let me point out that the Administrative
+Procedure Act also constrains how the executive branch writes
+its regulations, the processes it must use before they can have
+the force of law. So there is a long tradition in our modern
+history of Congress asserting constraints over how the
+President and the executive branch can issue regulations. It is
+fully compatible with that for Congress to say, Before this
+regulation that you are proposing, Mr. President, or the
+agency, it has to come back to Congress and sit there for
+Congress to give its approval of the content of that
+regulation.
+    I think it is fully within Congress's power to do that. I
+would point out that for the century prior to the last century,
+there were no regulatory authorities or bodies, and the
+President was fully capable of exercising his duty under the
+Constitution to take care that the laws were faithfully
+executed.
+    So I think this act, perhaps it would be hubris to say that
+it goes as far as to restrain the President's executive
+authority because it simply doesn't do that. There are ways you
+can argue that, in fact, it enhances it, as I mentioned
+earlier, vis-a-vis the so-called independent agencies, because
+his signature on the bill approving the regulation gives him
+control over those agencies and the policies that they develop.
+    Mr. Gowdy. Mr. Adler, I may have heard you incorrectly. And
+if I did, I want to give you a chance to correct. I wrote down
+that you said there have been 3,500 regulations promulgated in
+the past?
+    Mr. Adler. In 2009, I think the exact number is 3,503. And,
+of those, I don't remember the exact number, but several dozen
+of those were major. But the 3,500 number was all regulations
+in, I believe, 2009.
+    Mr. Gowdy. All right. I am just a prosecutor, so forgive me
+for not knowing much about civil law. But would the violation
+of a Federal regulation be evidence of negligence in a civil
+suit?
+    Mr. Adler. It depends.
+    Mr. Gowdy. It depends on what?
+    Mr. Adler. I mean, it depends on the nature of the
+regulation; it depends on what is at issue. But, I mean, there
+are instances in which that could be evidence of that. It would
+depend. I guess it would really depend on a lot of factors,
+including what the State laws are.
+    Mr. Gowdy. Are there any criminal penalties connected with
+violations of Federal regulations?
+    Mr. Adler. There often are criminal penalties associated
+with violating----
+    Mr. Gowdy. How can Congress abdicate its responsibility for
+criminal enforcement to a nonelected entity?
+    Mr. Adler. Well, I think you have hit on the key issue
+here, is that Congress, for expedience, has delegated lots of
+authority to administrative agencies to develop rules of
+conduct in a wide range of detailed and complex areas. And I
+think what we have overlooked is that it is ultimately Congress
+that is responsible for that authority.
+    And especially when you have rules that are going to carry
+criminal sanctions or, as in the case of the REINS Act, rules
+that are estimated to have a substantial effect on the economy,
+which is a rough proxy for a really major policy decision that
+will affect a large part of the country, I think it is
+certainly reasonable to say that we should make sure the people
+who are the source of the legislative power in the first place,
+Congress, where all legislative power is vested under article 1
+of the Constitution, is accountable for that decision and that
+members of the public know whether or not their representatives
+believe that imposing that sort of rule is or is not a good
+idea.
+    Mr. Gowdy. Ms. Katzen, you do not challenge the
+constitutionality of congressional oversight, correct?
+    Ms. Katzen. Not at all.
+    Mr. Gowdy. You don't even challenge the wisdom of
+congressional oversight.
+    Ms. Katzen. I endorse it wholeheartedly.
+    Mr. Gowdy. So when you mentioned that there are
+constitutional infirmities in this bill, which, as I read it,
+is Congress reclaiming its responsibility/authority for
+oversight, what do you mean by ``constitutional infirmities?''
+    Ms. Katzen. I think the REINS Act goes well beyond
+oversight. And the Chairman talked about, in his opening
+statement, fine-tuning the regulatory system. I think the REINS
+Act is a blunt instrument that goes well beyond oversight. What
+it says is that Congress must affirmatively approve an action
+that it has already delegated and on which a lot of work,
+effort, and resources have been spent in refining and
+developing and issuing a rule.
+    Mr. Gowdy. But you would agree with me, Congress could
+reclaim that delegation in the first place, right?
+    Ms. Katzen. Absolutely. And that is through--the
+Congressional Review Act does exactly that, because it
+satisfies the bicameral and presentment part of Chadha, and it
+says Congress is saying: You can't do that. That is very
+different from saying: Before you do anything in this area, you
+must come back, even though we have already delegated it to
+you, you must come back and get our permission.
+    Mr. Gowdy. What is the constitutional distinction between
+doing the two?
+    Mr. Coble. The gentleman's time is expired.
+    Ms. Katzen. I think there is a significant----
+    Mr. Gowdy. I apologize, Mr. Chairman.
+    Mr. Coble. You may answer that quickly, Ms. Katzen.
+    Ms. Katzen. I think there is a significant difference
+between the two. And that is why the Congressional Review Act
+was originally crafted as it was, to be a change of the law,
+not a filter before which implementing a pre-existing law can
+go forward.
+    Mr. Gowdy. Thank you, Mr. Chairman.
+    Mr. Coble. Thank you, Mr. Gowdy.
+    Mr. Conyers?
+    Mr. Conyers. Thank you, Chairman Coble.
+    My ex-prosecutor colleague asked why the Congress doesn't
+enforce the laws. Well, as McIntosh and Davis and I know, we
+pass the laws, we oversight the laws, we do not enforce the
+laws. There is a little Federal agency called the Department of
+Justice that enforces the laws. So that is my criminal justice
+lesson for the day.
+    Now, this $1.75 trillion annually that has been raised
+here, I would like to ask Ms. Katzen, how does that comport
+with the issues of the Congressional Budget Office, which has a
+different set of figures here? OMB said that major regulations
+promulgated over the 10-year period between 1998 and 2008 are
+estimated to have cost between $51 billion and $60 billion.
+    Ms. Katzen. I would love to answer the question, but I know
+the red light will go off before I even get halfway there.
+    The 1.75 comes from a study that was presented in the mid-
+1990's that immediately raised all sorts of flags, both as to
+the assumptions, the methodology, et cetera. CRS did a very
+careful analysis, which I would commend to you, that shows the
+different problems that exist.
+    Now, Congress ordered OMB to do the same thing, to do a
+real study. And what OMB did was to come up with the numbers
+that you had. They are very large numbers, but they are much
+smaller than the 1.75 trillion numbers.
+    Congress, in its wisdom, said, determine the costs and
+determine the benefits. So, as you talk about the $43 billion
+to $55 billion in costs, they found $128 billion to $616
+billion in benefits. So even if you use the highest end of the
+costs and the lowest end of the benefits, you still have net
+benefits of $73 billion.
+    Mr. Conyers. All right. Let me ask you this. Who was it
+that made this authoritative statement, allegedly, about over a
+trillion dollars? Do you know?
+    Ms. Katzen. It originally came from a Tom Hopkins study and
+then a gentleman whose name I----
+    Mr. Conyers. Mr. Adler, do you know?
+    Mr. Adler. I don't know off the top of my head.
+    But I would just note that the OMB numbers that have been
+referenced exclude independent agencies and exclude non-major
+rules, which are over 90 percent of the regulations that are
+finalized each year. So to compare the OMB numbers with the
+other estimates is not----
+    Mr. Conyers. Mr. McIntosh, do you know?
+    Mr. McIntosh. Unconstitutional is the subject that Ms.
+Katzen has referred to----
+    Mr. Conyers. But who----
+    Mr. McIntosh. And lots of people in the literature have
+cited that as they have discussed the cost of Federal
+regulation.
+    Mr. Conyers. So everybody says that somebody said it once
+and it is in a study somewhere, and so that is about it, huh?
+    Ms. Katzen, did you want to add anything to this?
+    Ms. Katzen. Someone just handed me something which uses the
+name Mark Crain and Thomas Hopkins, and I think they are the
+co-authors of this $1.75 trillion--whatever.
+    Mr. Conyers. All right. Let me ask this question. If this
+REINS Act, which is high up on the list of our new leadership's
+agenda--it is the fourth piece of legislation introduced--what
+would this do to health-care reform? How would you take an
+enormous piece of legislation like this--and I think
+``ObamaCare'' is going to be a congratulatory remark in
+history--how would this affect it? Wouldn't it just stop it in
+its tracks?
+    Mr. Adler. It depends on what Members of Congress feel
+about it. If the majority of those in both houses of Congress
+support the regulations that are necessary to implement that
+law, then it would go on as before.
+    The only thing that would stop it, under the REINS Act,
+would be is if the majorities of Congress don't support those
+regulations. It ensures, essentially, that the American people
+get the sort of regulatory policy that the American people
+want. And I would think that that is a step toward greater
+political accountability and----
+    Mr. Conyers. Now, well, wait a minute. The majority of the
+Congress already passed the bill, and the President signed it
+into law.
+    Mr. Adler. But congressional opinions change. Congress
+repeals statutes, revokes statutes, alters statutes.
+    Mr. Conyers. Well, that is----
+    Mr. Adler. And one of the problems is you don't really have
+legislation that was enacted last year----
+    Mr. Conyers. Can I ask unanimous consent for 1 additional
+minute?
+    Mr. Coble. Certainly.
+    Mr. Conyers. Thank you, sir.
+    Now, look, gentlemen and lady, you all know that any one of
+us, to challenge a regulation, all they have to do is walk into
+the nearest Federal district court and sue away. And we have
+regulations that get reviewed and modified or kicked out. What
+is wrong with that?
+    Mr. Adler. Nothing. But courts don't want to review the
+policy merits of regulation. Courts don't ask, is this
+regulation a good idea? Are the costs worth the benefits? Is
+this something the American people support?
+    What courts look at is the nonpolicy questions: Were the
+rules followed? Was there--and those are two separate
+questions. This body is responsible for the policy questions.
+    Mr. Conyers. But, look, we just passed health care months
+ago. You mean we got to go back and look at it again?
+    Mr. Adler. I think that when you have major legislation and
+agencies are implementing that legislation, it is a good idea
+for Congress to----
+    Mr. Conyers. Do you know what this sounds like to me now?
+It sounds like a backdoor way of legislating again, when they
+are charged with actually just making the rules to implement a
+bill already signed into law.
+    Mr. Coble. Mr. Conyers, your minute is over.
+    Mr. Conyers. Thank you very much, Mr. Chairman, for your
+generosity.
+    Mr. Coble. Mr. Reed? Mr. Reed is up next for 5 minutes.
+    Mr. Reed. Oh, thank you, Chairman.
+    I would like to follow up on the comment that was just made
+by Mr. Conyers, when he said the individual, whoever is
+objecting to the rule, can sue away. Who pays for that? Who is
+the person who has to bring that lawsuit? Usually, it is the
+small-business owner. Is it a farmer, is it a gentleman who is
+objecting to that regulation?
+    I will ask Mr. McIntosh that question.
+    Mr. McIntosh. Yes, sir, you are exactly right. It is the
+private party that has been affected by the regulation.
+    And their recourse is, in fact, very limited, in they have
+to argue that the agency failed to follow its own procedures or
+acted arbitrarily and capriciously, not that they disagree with
+or they feel it is unfair that the regulation imposes burdens,
+say, on wheat farmers but not on corn farmers.
+    And the law says to the agency, the Department of
+Agriculture, you go and allocate what should be planted on the
+land and, you know, do it in a way that maximizes the return
+for agriculture. Well, if the farmer who is adversely affected
+by that wants his day in court, all he can say is, ``Well,
+sure, they allocated it, but they didn't give me my
+allocation.'' The courts say, ``Sorry, you lose. They had to
+make that decision.''
+    And I think Mr. Conyers's later remark reflects correctly
+that what the REINS Act would do is say that decision, who gets
+which allocation for what crops to do, should actually be a
+legislative decision. And so, in many ways, what the bill does
+is correct a constitutional deficiency that is inherent in the
+regulatory program, where the accountability for legislative
+decisions like those never comes back to Congress.
+    Mr. Reed. Then correct me if I am wrong, Mr. McIntosh. That
+bureaucrat who is creating that rule, he is not an elected
+official, correct?
+    Mr. McIntosh. No. He would be typically a civil servant or
+assigned by a person appointed by the President.
+    Mr. Reed. So when I go talk to my small-business
+constituent or my farmer in my district and he objects to the
+policy, I can't go to him, ``Well, we will vote that guy out
+the next time around because we disagree with that policy.'' He
+is essentially stuck with that rule, other than the courts that
+are available to him. Is that a fair assessment?
+    Mr. McIntosh. His political recourse would be to join
+others to vote enough Members of Congress to change the law or
+to vote a new President who would change the regulation, direct
+his agency.
+    Mr. Reed. Okay. I appreciate that.
+    There has been a lot of objection that I am hearing in this
+testimony that one of the problems is the workload that would
+be put on Congress, finding the time to go through and develop
+that.
+    Wouldn't we face that same problem if we went through the
+enabling legislation and amended the enabling legislation?
+Wouldn't that be a tremendous workload on Congress, to go back?
+    No one objects to the fact that Congress would have that
+authority to do it, do you? We could go back through each of
+the pieces of legislation, change the enabling authority and
+clarify our intent as to what we meant from Congress. No one
+objects to that, correct?
+    Mr. McIntosh. No.
+    Mr. Adler. Right.
+    Mr. Reed. So that burden on Congress would be bigger, I
+would argue. Am I farfetched on that conclusion, that that
+would be a huge burden on Congress?
+    Mr. McIntosh. Yes, it would. I mean, back in 1995, we
+thought about doing that to address a lot of the regulatory
+problems, and some of them got dealt with and others didn't.
+    Let me take, though, 2 seconds to----
+    Mr. Reed. Please.
+    Mr. McIntosh [continuing]. Brag about you all. I actually
+think Congress can handle that burden. Now, the Senate
+continues to mystify me, but the people who are----
+    Mr. Reed. You are not alone.
+    Mr. McIntosh [continuing]. In that body say they get things
+done by unanimous consent, ultimately. But I think it can be
+done.
+    Mr. Reed. Thank you.
+    I yield the balance of my time.
+    Mr. Coble. I thank the gentleman.
+    The gentleman from Georgia, Mr. Johnson, is recognized.
+    Mr. Johnson. Thank you, Mr. Chairman.
+    Mr. Adler, isn't it correct that regulations that pertain
+to clean air, these are the regulations that you are speaking
+of being able to stop?
+    Mr. Adler. Well, any regulations that----
+    Mr. Johnson. Yeah. Air quality, water quality?
+    Mr. Adler. The examples I gave there weren't----
+    Mr. Johnson. Well, no, no, no, no. I just want you to
+answer my questions. Now, water quality, air quality, correct?
+    Mr. Adler. Yes. Congress should be held accountable for
+those.
+    Mr. Johnson. What about food safety?
+    Mr. Adler. I think Members of Congress should be willing to
+vote to be held accountable.
+    Mr. Johnson. What about drug safety?
+    Mr. Adler. I think Members of Congress should be held
+accountable by voting on whether or not those regulations are a
+good idea.
+    Mr. Johnson. What about financial reform?
+    Mr. Adler. Again, Congressman, I don't think Members of
+Congress----
+    Mr. Johnson. I mean, that is covered under--these are
+regulations that are brought to bear on big business and
+industry----
+    Mr. Adler. Yes.
+    Mr. Johnson [continuing]. Primarily.
+    Mr. Adler. Primarily. And I think----
+    Mr. Johnson. All right. And so----
+    Mr. Adler.--Members of Congress should be held more
+accountable----
+    Mr. Johnson. So things like the health and safety of
+workers, do you want to be able to stop those kinds of
+regulations from becoming the force of law?
+    Mr. Adler. No. I want my Member of Congress to have to vote
+on that decision. I want to know if my Member of Congress
+supports it.
+    Mr. Johnson. Well, tell me now. You contend that, what, $1
+trillion per year is what all of these regulations cost? How
+many new regulations are promulgated yearly that have that
+economic significance?
+    Mr. Adler. That is the aggregate effect. Between 2000 and
+2009, the number of major rules that would be affected by the
+REINS Act has been between 50 and 80 per year.
+    Mr. Johnson. Okay. And you are familiar with the attributes
+of the Senate----
+    Mr. Adler. Yes.
+    Mr. Johnson [continuing]. In terms of them doing their
+work.
+    Mr. Adler. Yes. And that is why the REINS Act----
+    Mr. Johnson. And you are aware of the fact that one of
+those attributes is not the ability to move quickly, is that
+correct?
+    Mr. Adler. I think that the REINS Act addresses that.
+    Mr. Johnson. You heard that before, and you know that to be
+a fact. Isn't that correct?
+    Mr. Adler. It is correct.
+    Mr. Johnson. That the Senate does not move quickly?
+    Mr. Adler. The Senate has to be forced to move quickly, and
+I think the REINS Act accomplishes that.
+    Mr. Johnson. And so an obscure regulation, you think, would
+be enough to cause them to set aside all of their judicial
+appointments and other important--treaties that need to be
+ratified, all of the legislation that Mr. McIntosh gives us
+credit for for producing here in the House, but, because of an
+obscure regulation, they would suddenly spring into action. Is
+that what you want us to believe?
+    Mr. Adler. I don't believe regulations dealing with clean
+air or clean water or financial services or some of the
+examples you gave that cost more than $100 million a year, by
+the executive branch's own estimates, is an obscure regulation.
+    Mr. Johnson. Well, let's talk about obscure regulations.
+Who would decide--or, how would it be decided that a regulation
+should be subjected to the congressional review under the REINS
+Act?
+    Mr. Adler. The executive branch's cost estimates would
+determine that.
+    Mr. Johnson. Okay. Who would bring that to the attention of
+Congress?
+    Mr. Adler. The REINS Act has a procedure where that
+information is automatically transmitted to both houses of
+Congress with the regulation once it is finalized.
+    Mr. Johnson. Who would do that?
+    Mr. Adler. I would have to check. I think both----
+    Mr. Johnson.Would it be the U.S. Chamber of Commerce?
+    Mr. Adler. The agency does it, and I believe the
+comptroller general that heads the Government Accountability
+Office is responsible for submitting that to both houses. And
+then, within 3 days, legislation is automatically introduced,
+or the joint resolution is automatically introduced in both
+houses. The last draft that I recall reading in legislation----
+    Mr. Johnson. So there is some ability for politics to
+infect the process of actually producing the legislation then.
+    Mr. Adler. Actually, no. The way the REINS Act is drafted,
+there is no amendment----
+    Mr. Johnson. Well, it would be a government bureaucrat that
+would do that?
+    Mr. Adler. I spend a lot of time doing regulatory policy
+and----
+    Mr. Johnson. How do we get----
+    Mr. Adler [continuing]. Much worried about the backroom
+deals in regulatory agencies than any up-or-down votes on the
+floor of the body of the whole.
+    Mr. Johnson. How will we get politics, Mr. Adler, out of
+the rule-making process?
+    Mr. Adler. We----
+    Mr. Johnson. And aren't we, by subjecting the rule-making
+process to congressional dictates, aren't we, by the very
+nature of what we do here in the House, subjecting these rules
+to politics----
+    Mr. Adler. Well, rules----
+    Mr. Johnson [continuing]. And influence, political
+influence, with campaign contributions and whatnot?
+    Mr. Adler. Rules that govern private behavior are things
+that political officials should be held accountable for. And I
+believe that sunlight is the best disinfectant, and requiring
+all Members of Congress to vote up or down in the body of the
+whole is far less subject to special-interest manipulation than
+leaving things in the halls of regulatory agencies. Your small-
+business man, your small homeowner isn't spending time at the
+FCC or the EPA or the USDA lobbying on regulations. I really
+deserve to know how Members of Congress feel and then vote.
+    Mr. Johnson. We just want to remove all regulatory action
+here in Congress--less government. Let's cut government, let's
+cut regulation, and let's allow the members of the U.S. Chamber
+of Commerce and other large businesses that traditionally shut
+out small business----
+    Mr. Coble. The gentleman's time is expired.
+    Mr. Johnson [continuing]. Just to run roughshod over
+society, and whatever will be will be.
+    I appreciate it. Thank you, sir.
+    Mr. Coble. The Chair recognizes the gentleman from Arizona,
+Mr. Franks.
+    Mr. Franks. Well, thank you, Mr. Chairman.
+    And thank all of you for being here today.
+    I guess, Mr. McIntosh, my first question will be to you,
+sir. It occurs to me that not only the process here but the
+mindset in which agencies write their regulations could be one
+of the most significant advantages of this legislation.
+Because, you know, if I were the director of an agency and I
+were writing regulations and I knew that it was going to be
+subjected to the scrutiny and oversight of Congress, that
+Congress is going to have to prove it, I would be pretty
+careful how I wrote that. I would make sure that it was a
+regulation that would comport with a lot of common sense and
+that could withstand the rigors of the legislative process
+itself.
+    So, with that, since it only requires Congress to approve
+major rules but it could affect and change the culture of the
+agency, in what way do you think that that would improve all
+rule-making? Or do you think I am just all wet here?
+    Mr. McIntosh. No, I think you are exactly right, that the
+prospect of having the work product that the agency does in
+developing a regulation be scrutinized in a debate in Congress
+and voted up or down will have, as it does on every other
+decision the agency makes where Congress has expressed an
+interest, has an impact on their thinking and their calculation
+about it. And that provides more accountability, provides more
+accountability ultimately to the citizens, who vote on Members
+of Congress.
+    That same accountability, by the way, is also in the
+Congressional Review Act. It is more attenuated. But you can
+still, by having a discharge position in the House to stop a
+rule, rather than the presumption of it--with the presumption
+being that it goes forward, or 30 Members of the Senate can
+have a discharge position, the mere prospect of a debate, even
+if everyone assumes that won't pass, I think, can also have a
+salutatory effect on the agencies and their deliberations. So I
+am encouraging Members of Congress, while you are deliberating
+the REINS Act, to use your authority under the Congressional
+Review Act, as well.
+    But, again, it comes down to sunshine, which Mr. Adler
+mentioned. Bringing things out into the public debate has a
+tremendous benefit on all of the actors involved.
+    Mr. Franks. Well, thank you, sir.
+    You know, I know there is going to be, as already manifest
+here, some debate as to the constitutionality of the
+legislation. I, for one, am fundamentally convinced that it is
+constitutional, but I want to, you know, be open to potential
+dissent here.
+    Those who cite article 2, section 1 of the Constitution
+obviously are citing that Executive power should be vested in
+the President. And, of course, some of us would cite article 1,
+section 1, that the legislative power is vested in the
+Congress. And it seems to me that regulation certainly has a
+lot of the same characteristics as legislation, so if you are
+going to make that case, it is important to consider.
+    But in constitutional terms, Mr. Adler, is there any
+critical substantive difference between the REINS Act and a
+statute that treats new regulations as simply proposed
+recommendations to Congress for legislative action?
+    Mr. Adler. No, I don't think there is any significant
+difference, and I think both are clearly constitutional under
+existing precedent.
+    Mr. Franks. I am going to give Ms. Katzen an opportunity,
+actually, here in a moment. But I wanted to find out, what is
+your--why do you postulate that this is constitutional? Is
+there anything that you would point out in particular?
+    Mr. Adler. Well, a couple things. I mean, the bicameral and
+presentment requirements have to be satisfied. Both would
+satisfy that.
+    I think that the Supreme Court has made clear, repeatedly,
+in numerous opinions, as have lower courts, that all authority
+to issue regulations must be expressly granted. There is no
+residual authority to issue regulations that comes with other
+grants of authority of agencies. It is not something that is
+seen as inherently Executive. It is something that, for the
+most part, the majority of Federal agencies did not enjoy until
+the 1970's. There were some exemptions.
+    And the presumption had been that, unless agencies are
+expressly granted the authority to issue legislative-type
+rules, that is an authority they lack. And Congress is not
+obligated to delegate that authority. And if Congress wants to
+restrain that authority in some way, such as it does here,
+there is no constitutional problem. And it doesn't create the
+sorts of concerns that might be raised if, for example,
+Congress sought to impose similar limits on the exercise of,
+say, prosecutorial discretion or other things that are closer
+to the court----
+    Mr. Franks. I understand. No, that is a good answer.
+    Quickly then, Ms. Katzen, Justice Breyer and Professor
+Tribe of Harvard have both published articles supporting a view
+that the REINS Act is constitutional. And I know you know that.
+But could you specify for us why you think Mr. Adler is wrong
+or why Justice Breyer or Professor Tribe are wrong? And do you
+think there is any merit to their views whatsoever?
+    Ms. Katzen. Well, thank you for that open invitation. And
+the light is red, but if I may answer?
+    Mr. Coble. Briefly, if you will, Professor.
+    Ms. Katzen. I will try.
+    I think Justice Breyer, who was then a judge, not a
+justice, was engaging in what he often does, which is extremely
+creative, more-theoretical-than-practical analysis in this
+article, which I have read very carefully.
+    And I think one of the most important things is that he
+sees it as a replacement for the one-house veto, which was
+invalidated in Chadha. And he saw it as a case by case, going
+through each of the statutes, rather than an across-the-board,
+blanket provision.
+    But, most importantly, when he finishes, he makes it very
+clear that it is neither practical nor desirable. He questions
+the wisdom of it. And if you read the entire article, it is a,
+``Well, we could do this kind of stuff, and we could think
+about these kinds of--''
+    Mr. Franks. So, in other words, he thinks it is stupid but
+constitutional?
+    Ms. Katzen. He thinks that it is----
+    Mr. Coble. The gentleman's time has expired.
+    Ms. Katzen. But this was before the last several decades of
+Supreme Court decisions--in Morrison v. Olson, Mistretta, a few
+other cases--in which the Court has been very clear that
+separation of powers has a life beyond. They are looking at it
+on a functional basis----
+    Mr. Coble. The time has expired, Professor. If you will
+wrap it up.
+    Mr. Franks. Thank you, Mr. Chairman.
+    Mr. Coble. The time has expired.
+    Ms. Katzen. Yes, sir.
+    Mr. Coble. The gentleman from Illinois.
+    Mr. Quigley. Thank you, Mr. Chairman.
+    You know, I am still relatively new here, but I learn
+something new every day. Today I learned that it is not good
+when someone who is not elected is enforcing our laws,
+especially criminal ones. So the next time a police officer
+stops me, I am going to say, ``Who elected you?'' Or FBI agents
+or State's attorneys or--just go on down the line.
+    In the end, the only person who is elected in the executive
+branch is the Executive. At the county level, I suppose that is
+the State's attorney. But in the end, there is some delegation.
+This isn't 1776. It is a far more complicated world.
+    And, ladies and gentlemen, I would respectfully suggest or
+defy you to say, I am not going to think about regulation
+today. When I get on this commuter airliner, I am not going to
+wonder or worry about how many hours' sleep that pilot got last
+night. When you come to my hometown in Chicago, the morbidity
+and mortality capital of the United States for asthma, don't
+think about regulation. Or if you drink our tap water in
+Chicago, which has chromium levels--not in the lake, but in the
+drinking water--three times higher than the new--I know it is a
+bad word--regulation proposed in California. It is the Erin
+Brockovich chemical, if you will recall.
+    So you can decide now or you can decide when you have your
+eggs in the morning--a million cases of salmonella last year. I
+understand, we all understand, that the President was trying to
+strike a balance here. That over-200-year friction between the
+executive branch and the legislative branch. And it gnaws on
+you when you don't like what they do, so you want to change the
+rules when it bothers you.
+    So I looked at it. And I talk about the President striking
+a balance. Mr. McIntosh, Mr. Adler, how many rules do you think
+this President's EPA has proposed or finalized in his first 21
+months? Just a guess, if you want.
+    Mr. Adler. Major rules or all rules?
+    Mr. Quigley. All rules. EPA only, Clean Air Act.
+    Mr. Adler. Just under the Clean Air Act?
+    Mr. Quigley. Yeah.
+    Mr. Adler. My guess would be, just under the Clean Air Act,
+probably under a dozen.
+    Mr. Quigley. It is much higher. It is 87. And I was
+appalled. I couldn't believe it. And I thought, well, who could
+be more liberal than--maybe the Clinton administration. The
+first 2 years, what do you think his numbers were? A hundred
+and fifteen. It just shows a trend here. I looked further.
+George W. Bush, first 2 years, 146--146.
+    So, Mr. McIntosh, you used the expression, I believe--and I
+don't want to misquote you, former Member--that the courts
+``forced their hand'' on carbon. Does that mean you just
+disagreed with them?
+    Mr. McIntosh. No. What I meant by that was the Court, I
+think, incorrectly interpreted the bill.
+    Mr. Quigley. But isn't that--go back to the Constitution.
+Now you are disagreeing with two out of three branches. Didn't
+the Constitution say that the executive enforces and then the
+Supreme Court interprets, and they interpreted. So you are
+upset with both of them now.
+    Mr. McIntosh. Well, at the time, the executive branch
+didn't share the Court's interpretation. And I think there was
+a fair amount of evidence in the legislative history that
+Congress didn't intend that when they passed the Clean Air Act
+amendments.
+    Mr. Quigley. Well, just, if I could, sir, please, let me
+just read you the language that you had a problem with, section
+202(a)(1): ``which, in its judgment, causes''--we are talking
+about carbon here, that you don't have a problem with--``which,
+in its judgment, causes or contributes to air pollution which
+may reasonably be anticipated to endanger public health or
+welfare.''
+    So we were talking generalities before, but now we are
+talking specifics. You don't think that language implies that
+there could be a problem that someone in the EPA could
+reasonably interpret to endanger the public health or safety?
+    Mr. McIntosh. No. That section of the Clean Air Act was
+intended to give EPA the authority to regulate when substances
+that were, at the time that bill was passed, not known to be
+problematic for the health become known to them.
+    But, at the time, people knew of carbon dioxide. And I
+would recommend you check with John Dingell, who was the author
+of it. They did not intend for that provision of the Clean Air
+Act to give authority for EPA to regulate carbon dioxide. They
+talked about it in other parts of the bill, decided not to give
+that authority.
+    But let me--the language you cited I think is also a really
+important point for another issue that is very key to this
+whole debate. And that is, how specific should Congress be when
+it delegates the legislative authority to the regulatory
+agencies? And there has always been a debate back and forth
+about whether general language, like the language you cited, is
+appropriate. The consensus is that it has been in the Clean Air
+Act, in the language cited there.
+    But I would point you to an article that I referred to in
+my testimony by a professor at Boston University, Gary Lawson,
+where he points out that, if you had the ``Goodness and
+Niceness Act'' and said to the regulatory agency, ``Promulgate
+rules for goodness and niceness, and figure out what the
+punishment should be,'' that that would be too broad a
+delegation.
+    So somewhere in there, there is a spectrum. And the
+Constitution says, no, the legislature can't delegate all of
+its legislative authority to the agencies. The REINS Act gives
+you the benefit of protecting against that, because for major
+regulations they come back to Congress and then there is a
+vote.
+    Mr. Quigley. Only if you disagree.
+    Mr. Gowdy. [presiding.] Mr. McIntosh, I apologize, but the
+gentleman's time is expired.
+    The Chair would recognize the gentleman from Florida, Mr.
+Ross.
+    Mr. Ross. Thank you, Mr. Chairman.
+    You know, it is interesting when we talk about the
+regulatory environment. And, as a businessman, one of the
+things I have learned is that, if I want to be profitable, if I
+want to make sure that I have the right environment, I try to
+manage my risks. And the risks I look at, of course, are, you
+know, there are some insurance risks, there is the market risk,
+there is my resource risk. But one of the things I have learned
+is the regulatory risk that exists is almost not manageable.
+And the reason it is not manageable is because there are no
+trends. There is no way you can anticipate what the regulatory
+environment is ever going to be if you want to start or operate
+a business.
+    And, in my particular State, there is a numeric nutrient
+water criteria that the EPA is trying to impose, coincidentally
+just on Florida, that my ag industry has indicated that it will
+cost over 14,000 full- and part-time jobs, lost over $1 billion
+annually, cost my phosphate and fertilizer industry $1.6
+billion in capital costs and $59 billion in operating costs.
+    It would seem to me that this act, this REINS Act, would
+allow at least some sense of risk management over the
+regulatory environment. Wouldn't you agree, Mr. Adler?
+    Mr. Adler. Oh, certainly.
+    Mr. Ross. And with regard to even more imposition of
+regulatory schemes, I am reminded back years ago when I was in
+the legislature--and this is on a smaller scale--but I was
+active in a Boy Scout group that had a summer camp. And they
+had had this property for 50 years. But they wanted to put an
+outhouse on there for the summer camp. But what they found out
+is that, even though they had no running water and no
+electricity, they had to go get architectural drawings,
+engineer-designed approved plans. The DEP had to do a soil
+sampling. And by the time they were able to even get anything
+in order to meet with the regulatory system, summer camp was
+over.
+    And what it taught me, though, was that logic and reason
+isn't always there. Now, I know that H.R. 10 exempts camping,
+hunting, and fishing. But without logic and reason, I think you
+also lack accountability.
+    And one of the things--I want to ask you this, Ms. Katzen.
+Would not the REINS Act allow for a greater sense of
+accountability to where it should belong, and that is in the
+congressional oversight of the regulatory environment?
+    Ms. Katzen. As I said earlier, Mr. Ross, I strongly endorse
+the notion of congressional oversight. I have no qualms
+whatsoever with your Committees calling up the--you call them
+bureaucrats; I would call them committed, career civil servants
+and political appointees at the agencies--and ask them, what
+are you doing and why are you doing it and what is the support
+for it? I think that is wholly appropriate.
+    But I would answer your earlier question to Mr. Adler
+differently. If you are worried about no trend, his answers to
+Mr. Quigley's question, was that there is no trend. Last year
+Congress passed a health-care bill. This year, it is going to
+be implemented, but it is going to come back up. And if one,
+not both, but just one house decides they don't like it, then
+it is not going to happen. And in 2 years, there will be
+another election, and maybe the other chamber will feel
+differently.
+    And the ability to predict what each election--and
+elections do have consequences, I do believe that, and I agree
+with that. But are you going to change, then, every 2 years the
+possibility that the rule is on, the rule is off, the rule is
+on, the rule is off, the rule is on, the rule is off? I think
+that leads to more uncertainty, less predictability. And----
+    Mr. Ross. So you would suggest that the status quo is more
+certain, in terms of assessing the regulatory risk?
+    Ms. Katzen. The regularity of process. You pass a bill; you
+then turn it over to the executive branch to faithfully carry
+out the laws and to issue the regulations. I agree with Mr.
+Adler, an agency is not a free agent, cannot do whatever it
+likes. It can only do what Congress has said. But if Congress
+says, set the limits at this level, and the agency does that,
+it is faithfully carrying out the decision that Congress
+enacted.
+    Mr. Ross. But wouldn't you agree that, in terms of
+accountability, that you have a greater degree of
+accountability where you have elected representation?
+    Ms. Katzen. Yes. And the initial statute that was passed
+that authorizes the agencies is one that is fully accountable
+because it was bicameral and presentment. It was passed by both
+houses of Congress, and it was signed by the President.
+    And the fact that now one house may think differently about
+it does not lead to greater accountability. What about the
+other house, which may like the idea? You have gridlock, you
+have problems. And I think those problems create greater
+uncertainty for businesses.
+    Mr. Ross. But with regard to gridlock--and, again, just to
+point out something real quickly here--in terms of the bill,
+the content of the bill says that, within 3 days of the
+regulatory rule, that Senate shall introduce their joint
+resolution. So there would not be--there would be an expedited
+fashion. So I take issue with you, there being gridlock there.
+    But I see my time has expired. Thank you.
+    Mr. Gowdy. Thank you.
+    On behalf of all of us, we would like to thank our
+witnesses for their testimony today.
+    Without objection, all Members will have 5 legislative days
+to submit to the Chair additional written questions for the
+witnesses, which we will forward and ask the witnesses to
+respond as promptly as they can so their answers may be part of
+the record.
+    Without objection, all Members will have 5----
+    Mr. Conyers. Mr. Chairman, I ask unanimous consent to enter
+into the record the CRS report on total costs and benefits of
+rules.
+    Mr. Gowdy. Without objection.
+    Mr. Conyers. Thank you.
+    [The information referred to follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Gowdy. Without objection, all Members will have 5
+legislative days to submit any additional materials for
+inclusion into the record.
+    With that, on behalf of all of us, thank you for your
+expertise, for your time, and your participation.
+    This hearing is adjourned.
+    [Whereupon, at 5:35 p.m., the Subcommittee was adjourned.]
+                            A P P E N D I X
+                              ----------
+               Material Submitted for the Hearing Record
+    Responses to Post-Hearing Questions from Sally Katzen, Visiting
+ Professor, New York University School of Law, Senior Advisor, Podesta
+                                 Group
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+          Report from the Center for Progressive Reform (CPR)
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                                 <all>
+</pre></body></html>

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+<html>
+<title> - ICE WORKSITE ENFORCEMENT</title>
+<body><pre>
+[House Hearing, 112 Congress]
+[From the U.S. Government Publishing Office]
+                ICE WORKSITE ENFORCEMENT--UP TO THE JOB?
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                            SUBCOMMITTEE ON
+                   IMMIGRATION POLICY AND ENFORCEMENT
+                                 OF THE
+                       COMMITTEE ON THE JUDICIARY
+                        HOUSE OF REPRESENTATIVES
+                      ONE HUNDRED TWELFTH CONGRESS
+                             FIRST SESSION
+                               __________
+                            JANUARY 26, 2011
+                               __________
+                            Serial No. 112-2
+                               __________
+         Printed for the use of the Committee on the Judiciary
+      Available via the World Wide Web: http://judiciary.house.gov
+                  U.S. GOVERNMENT PRINTING OFFICE
+63-875                    WASHINGTON : 2011
+-----------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
+area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC
+20402-0001
+                       COMMITTEE ON THE JUDICIARY
+                      LAMAR SMITH, Texas, Chairman
+F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
+    Wisconsin                        HOWARD L. BERMAN, California
+HOWARD COBLE, North Carolina         JERROLD NADLER, New York
+ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT,
+BOB GOODLATTE, Virginia                  Virginia
+DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
+STEVE CHABOT, Ohio                   ZOE LOFGREN, California
+DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
+MIKE PENCE, Indiana                  MAXINE WATERS, California
+J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
+STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
+TRENT FRANKS, Arizona                  Georgia
+LOUIE GOHMERT, Texas                 PEDRO PIERLUISI, Puerto Rico
+JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
+TED POE, Texas                       JUDY CHU, California
+JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
+TOM REED, New York                   LINDA T. SANCHEZ, California
+TIM GRIFFIN, Arkansas                DEBBIE WASSERMAN SCHULTZ, Florida
+TOM MARINO, Pennsylvania
+TREY GOWDY, South Carolina
+DENNIS ROSS, Florida
+SANDY ADAMS, Florida
+BEN QUAYLE, Arizona
+      Sean McLaughlin, Majority Chief of Staff and General Counsel
+       Perry Apelbaum, Minority Staff Director and Chief Counsel
+                                 ------
+           Subcommittee on Immigration Policy and Enforcement
+                  ELTON GALLEGLY, California, Chairman
+                    STEVE KING, Iowa, Vice-Chairman
+DANIEL E. LUNGREN, California        ZOE LOFGREN, California
+LOUIE GOHMERT, Texas                 SHEILA JACKSON LEE, Texas
+TED POE, Texas                       MAXINE WATERS, California
+TREY GOWDY, South Carolina           PEDRO PIERLUISI, Puerto Rico
+DENNIS ROSS, Florida
+                     George Fishman, Chief Counsel
+                   David Shahoulian, Minority Counsel
+                            C O N T E N T S
+                              ----------
+                            JANUARY 26, 2011
+                                                                   Page
+                           OPENING STATEMENTS
+The Honorable Elton Gallegly, a Representative in Congress from
+  the State of California, and Chairman, Subcommittee on
+  Immigration Policy and Enforcement.............................     1
+The Honorable Zoe Lofgren, a Representative in Congress from the
+  State of California, and Ranking Member, Subcommittee on
+  Immigration Policy and Enforcement.............................     3
+The Honorable Lamar Smith, a Representative in Congress from the
+  State of Texas, and Chairman, Committee on the Judiciary.......     8
+                               WITNESSES
+Mr. Kumar Kibble, Deputy Director, U.S. Immigration and Customs
+  Enforcement, Department of Homeland Security, Washington, DC
+  Oral Testimony.................................................    79
+  Prepared Statement.............................................    81
+Mr. Mark Krikorian, Executive Director, Center for Immigration
+  Studies, Washington, DC
+  Oral Testimony.................................................    89
+  Prepared Statement.............................................    91
+Mr. Michael W. Cutler, Senior Special Agent (Ret.), Immigration
+  and Naturalization Service, New York District Office
+  Oral Testimony.................................................    95
+  Prepared Statement.............................................    98
+Mr. Daniel Griswold, Director, Center for Trade Policy Studies,
+  Cato Institute, Washington, DC
+  Oral Testimony.................................................   101
+  Prepared Statement.............................................   104
+          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
+Prepared Statement of the Honorable Zoe Lofgren, a Representative
+  in Congress from the State of California, and Ranking Member,
+  Subcommittee on Immigration Policy and Enforcement.............     5
+Material submitted by the Honorable Zoe Lofgren, a Representative
+  in Congress from the State of California, and Ranking Member,
+  Subcommittee on Immigration Policy and Enforcement.............    11
+                                APPENDIX
+               Material Submitted for the Hearing Record
+Letter from Lynn Shotwell, Executive Director, American Council
+  on International Personnel (ACIP)..............................   126
+                       ICE WORKSITE ENFORCEMENT--
+                             UP TO THE JOB?
+                              ----------
+                      WEDNESDAY, JANUARY 26, 2011
+              House of Representatives,
+                    Subcommittee on Immigration
+                            Policy and Enforcement,
+                                Committee on the Judiciary,
+                                                    Washington, DC.
+    The Subcommittee met, pursuant to notice, at 1 p.m., in
+room 2141, Rayburn House Office Building, the Honorable Elton
+Gallegly (Chairman of the Subcommittee) presiding.
+    Present: Representatives Gallegly, Smith, Poe, Gowdy, Ross,
+Lofgren, Pierluisi, and Jackson Lee.
+    Staff Present: (Majority) George Fishman, Subcommittee
+Chief Counsel; Marian White, Clerk; and Tom Jawetz, Minority
+Counsel.
+    Mr. Gallegly. Good afternoon, everyone.
+    One of the things about chairing a Committee, I like to see
+my trains run on time. And today is probably a better example
+than most, when we are fighting the weather. And we are
+expecting votes on the floor here in the next 30 to 45 minutes,
+and there will be a series. So I want to try to get as much in
+before we have to break as possible.
+    I welcome everyone here today and just say that the
+Subcommittee on Immigration Policy and Enforcement is holding
+its first hearing of the 112th Congress. I would like to take
+this opportunity to welcome the Members of the Subcommittee as
+we begin our work this session.
+    I especially want to welcome Congresswoman Lofgren. I know
+she is on her way. I have worked with Zoe for many years and
+she is a very capable person. Ms. Lofgren, as you know, was the
+Chairwoman during the previous two Congresses, and she brings
+with her a great deal of expertise on the issues under the
+jurisdiction of this Subcommittee.
+    Let me now turn to today's hearing, which will be an
+overview of ICE's worksite enforcement efforts.
+    We are in the midst of a job depression more severe than
+most Americans have witnessed in their lifetimes. Over 14
+million Americans are currently unemployed. The most vulnerable
+American workers have been especially hard-hit. The official
+unemployment rate for native-born Americans without a high
+school degree exceeds well over 20 percent, and their
+underemployment rate exceeds 32 percent. That is almost a third
+of that entire class of workers.
+    And yet, at the same time, millions of illegal immigrants
+hold jobs. Even when low-skilled Americans can find jobs, their
+wages are depressed by illegals and other low-skilled
+immigration. Harvard economist George Borjas has estimated that
+immigration in recent decades has reduced the wages of native-
+born workers without a high school degree by almost 9 percent.
+    The Immigration Reform and Control Act of 1986 made it
+unlawful for employers to knowingly hire or employ immigrants
+not eligible to work and required employers to check the
+identify and work eligibility documents of all new employees.
+    Unfortunately, IRCA simply asked employers to see if the
+documents presented by their employees reasonably looked
+genuine. The easy availability of millions of counterfeit
+documents have made a mockery of this process. Compounding the
+flawed design of IRCA, first the INS and then U.S. Immigration
+and Customs Enforcement failed to vigorously enforce the
+employer sanctions law.
+    Then, in 2006, the Bush administration reinvigorated
+worksite enforcement. It placed a new focus on criminal
+prosecutions of both illegal immigrant workers who steal
+Americans' identities and employers who knowingly employ
+illegal immigrants. The number of civil arrests increased from
+445 in the year 2003 to 5,184 in the year 2008. And the number
+of criminal arrests increased from 72 to 1,103. And the number
+of criminal convictions increased from 156 to 908.
+    The net result of this new strategy was more jobs and
+higher wages for American and other legal workers. One employer
+subject to a worksite enforcement action raised wages by more
+than a dollar an hour and hired 200 legal workers. At another,
+400 legal workers applied for the 361 jobs left by deported
+illegal immigrants.
+    As Chairman Smith will elaborate, the Obama administration
+has relaxed the get-tough strategy of the Bush administration's
+ICE director, Julie Myers. ICE still audits the employment
+records of employers, but what happens to the illegal workers
+that it uncovers?
+    Minnesota Public Radio reported about the aftermath of an
+audit that identified 1,200 illegal immigrants in well-paying
+janitorial jobs. ``The most important rumor to dispel was that
+the workers were arrested.'' In the story, a retired ICE
+official wondered ``how effective this enforcement will be,
+considering the workers are free to move into other jobs.'' And
+a representative of the Immigration Law Center believes that
+the vast majority of the 1,200 illegal workers will ``probably
+try to wait it out, hoping for the laws to change so they can
+work here legally.''
+    The Obama administration's strategy clearly does a grave
+disservice to American workers. At today's hearing, we will
+hear from both ICE and its critics as to the optimal worksite
+enforcement strategy. The result of ICE's efforts must be that
+those jobs that are available go to Americans and to legal
+residents.
+    At this time, I would like to yield to my good friend. And,
+as I said in my opening statement, I have had the honor of
+working with Zoe Lofgren for many years. I have great respect
+for her. And while we don't always agree on every issue, I
+think we have worked in a very civil way, and our differences
+have never been personal.
+    So, with that, I would yield to my friend and neighbor from
+California, Ranking Member Zoe Lofgren.
+    Ms. Lofgren. Thank you very much. And I want to
+congratulate you, Mr. Gallegly, as the new Chair of this
+Committee and Mr. King as Vice-Chair and, certainly, Mr. Smith
+as Chair of the Committee.
+    Today's hearing is the first of many I expect we will have
+on the role that immigration plays in the U.S. economy and its
+impact on American jobs. And I hope and actually do expect, as
+you have just noted, that throughout these hearings, as with
+the new Congress, our two sides of the aisle will put aside
+heated rhetoric and work to solve some of the intractable
+problems that the country has been facing for far too long.
+    I think everyone agrees that our immigration laws are
+broken. For decades, these laws have not met the needs of our
+country--not of American businesses, American workers, or
+American families. And it is these broken laws that have led us
+to the morass we now find ourselves in.
+    Rather than fix those laws, like one would fix a broken
+car, some may now be suggesting that we just step on the pedal
+harder. But you can't keep enforcing a broken system without
+doing real damage. The truth is that continuing to increase
+enforcement without reforming the broken system will actually
+hurt the economy and American workers. Yes, increased
+enforcement may open up a particular job here or there, but
+this approach will actually destroy many more jobs than it
+creates.
+    What we often hear from colleagues on the other side of the
+aisle is that this issue boils down to simple math: that every
+time we find and deport an undocumented worker, we open a job
+for a native worker. But this math is bad math. It simply does
+not take into account the complex realities of our economy.
+    We held a hearing last September on our agricultural labor
+force, which is composed mostly of unauthorized workers. Under
+their simple math, the wrong math, if we just removed these
+workers, Americans would run to fill those jobs. But that is
+not even remotely true. Experts from all sides agree that, even
+in this poor economy, Americans are not returning to the fields
+as migrant workers to pick tomatoes, apples, or strawberries.
+And the increase in wages necessary to get U.S. workers to go
+to the fields as migrants would hike production costs so high
+that U.S. food products would no longer be competitive with
+imported products. The end result would be the closure of
+American farms, a less secure America, and mass offshoring of
+millions and millions of U.S. jobs.
+    Let's be clear here. If we just ramp up enforcement without
+reforming the system, job losses in agriculture would not be
+confined to the fields. The Department of Agriculture reports
+that every on-farm job supports or creates about 3.1 upstream
+and downstream jobs--jobs in manufacturing, seed production,
+processing, packaging, distribution, and accounting--that are
+overwhelmingly filled by United States workers. The truth is
+that every time we deport a farm worker, we also deport three
+other jobs that are held by Americans.
+    This is the real math we need to heed. Enforcement without
+reform may open up a job here or there, only to destroy four
+others over here.
+    Over the past 4 years, this Subcommittee held dozens of
+hearings on our immigration system. We heard time and time
+again from economists, business leaders, experts from all
+backgrounds and across ideological lines that an enforcement-
+only approach is damaging to businesses and workers. Some are
+now asking us to pay no attention to that testimony. They are
+asking us to simply step on the gas, whatever the damage.
+    Our laws need to be fixed so that they can work for our
+economy, our people, and our country. Yes, we need to secure
+our borders and make sure that only authorized workers are
+employed in the United States. But we also need an immigration
+system that meets the needs of our economy, one that grows when
+and where we need workers and shrinks when and where we don't.
+Without that, we will keep spending billions of taxpayer
+dollars enforcing broken laws.
+    Some argue we need to enforce our laws and secure our
+border before we can ever discuss reforms to our broken system.
+But the truth is that every day that passes is a day in which
+we pursue an enforcement-only approach, and that is damaging to
+our country.
+    I have additional comments, Mr. Gallegly, but, given that
+the bells have rung, I would ask unanimous consent to put the
+additional comments in the record. And perhaps we can hear from
+some of our witnesses before the vote.
+    Mr. Gallegly. Without objection.
+    Ms. Lofgren. I yield back.
+    [The prepared statement of Ms. Lofgren follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
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+                               __________
+    Mr. Gallegly. Now, I would yield to the gentleman, the
+Chairman of the full Committee, my good friend from Texas,
+Lamar Smith.
+    Mr. Smith. Thank you, Mr. Chairman.
+    And Mr. Chairman, congratulations to you on the first
+hearing of this Subcommittee. You have mentioned some
+compliments directed toward Ms. Lofgren, the gentlewoman from
+California, in her previous role as Chair of this Subcommittee.
+She ought to reread those comments because they were very
+complimentary even though she may have missed some of them.
+    I also happen to agree with something she said at the very
+end of her opening statement, and that is that only authorized
+workers should be employed. And we can certainly agree with
+that.
+    I do have an opening statement. I will try to get through
+it fairly quickly. And, as you pointed out, Mr. Chairman, I
+think we have a couple of votes, but hopefully our witnesses
+won't mind waiting for us to vote and return.
+    With unemployment over 9 percent for 20 months, jobs are
+scarce and families are worried. According to the Pew Hispanic
+Center, 7 million people are working in the United States
+illegally. These jobs should go to legal workers, and securing
+these jobs for American and legal immigrant workers should be a
+priority of the Federal Government.
+    The Office of Immigration and Customs Enforcement, ICE,
+should enforce the law and conduct more worksite enforcement
+activities. Each time ICE arrests, detains, or deports an
+illegal worker, it creates a job opportunity for an American
+worker. Each time the Department of Justice brings a criminal
+action against an employer who knowingly hired illegal workers,
+it sends a powerful message that their employment will not be
+tolerated.
+    Unfortunately, worksite enforcement has plummeted under the
+Obama administration. Administrative arrests have fallen 77
+percent from 2008 to 2010. Criminal arrests have fallen 60
+percent. Criminal indictments have fallen 57 percent, and
+criminal convictions have fallen 66 percent. And the number of
+the investigative hours devoted to worksite enforcement has
+fallen by 34 percent in the last 2 years.
+    How does the Administration justify these policies? With
+millions of Americans unemployed, it is hard to imagine a worse
+time to cut worksite enforcement efforts by more than half.
+    ICE will testify today that it has increased the number of
+audits of companies' employment eligibility verification forms
+they filled out for their employees. The number of audits has
+increased from 503 in 2008 to over 2,000 in 2010, and the
+amount of fines has gone up, as well.
+    However, these audits are of questionable benefit. The GAO
+has found that, quote, ``ICE has faced difficulties in settling
+and collecting final fine amounts that meaningfully deter
+employers from knowingly hiring unauthorized workers. ICE
+officials told us that, because fine amounts are so low, the
+fines do not provide a meaningful deterrent. The amount of
+mitigated fines may be, in the opinion of some ICE officials,
+so low that they believe that employers view the fines as a
+cost of doing business, making the fines an ineffective
+deterrent for employers who attempt to circumvent the law,''
+end quote.
+    Stewart Baker, the Department of Homeland Security's
+Assistant Secretary for Policy Development in the prior
+Administration, said that, quote, ``the fines are ridiculously
+low, sometimes less than a New York City parking ticket.''
+    And what happens to the illegal workers who are seldom
+arrested? They go down the street and knock on the door of the
+next employer and take possibly another job from an American
+worker.
+    Critics of worksite enforcement claim that illegal
+immigrants hold jobs that Americans won't do. But even in the
+agriculture industry, where amnesty supporters insist we need
+illegal workers, 50 percent of the agriculture jobs are held by
+citizens and legal immigrants. Statements that are Americans
+are not willing to do these jobs demeans the hardworking
+Americans who actually do this work on a daily basis.
+    Citizens and legal immigrants should not be forced to
+compete with illegal workers for jobs. The Administration
+should put the interest of American workers ahead of illegal
+workers. All the Administration has to do is conduct worksite
+enforcement. Twenty-six million Americans who are unemployed or
+underemployed are asking the question, ``Mr. President, why
+aren't you protecting American jobs?''
+    Thank you, Mr. Chairman. And I yield back.
+    Mr. Gallegly. Thank you, Mr. Chairman.
+    I would yield just a moment to the Ranking Member for a
+unanimous consent request.
+    Ms. Lofgren. Thank you, Mr. Chairman.
+    I do request unanimous consent to submit a series of
+statements prepared for today's hearing from leaders in the
+labor, faith, refugee, and immigration advocacy community. And,
+in lieu of the time, I would simply submit the lists and
+statement to the record.
+    Mr. Gallegly. Without objection.
+    [The information referred to follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
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+                               __________
+    Mr. Gallegly. I see that Mr. Conyers isn't here, so what I
+would like to do, at this point, is introduce our witnesses.
+Then we are going to have to recess to go over and vote.
+    I don't know how many--do you know how many votes we have?
+    So it is about probably 45 minutes to an hour. So, if you
+folks can stand by.
+    First of all, we are honored to have a very distinguished
+group of witnesses today.
+    Mr. Kumar Kibble is the deputy director of the U.S.
+Immigration and Customs Enforcement. He serves as the chief
+operating officer for the principal investigative agency of the
+Department of Homeland Security. Mr. Kibble began his
+government career in 1990 as an infantry officer in the U.S.
+Army, 82nd Airborne. He received his bachelor of science degree
+from the U.S. Military Academy at West Point.
+    We are pleased to have you here, sir.
+    I think most of us know Mark Krikorian. Mr. Krikorian is
+executive director of the Center for Immigration Studies, a
+nonprofit, nonpartisan research organization in Washington,
+D.C., which examines and critiques the impact of immigration on
+the United States. He is the author of ``The New Case Against
+Immigration, Both Legal and Illegal.'' Mr. Krikorian holds a
+master's degree from the Fletcher School of Law in diplomacy
+and a bachelor's degree from Georgetown University.
+    Welcome, Mr. Krikorian.
+    Mr. Michael Cutler is a retired senior special agent with
+the Immigration and Naturalization Service, New York District
+Office. He joined the INS in 1971 as an immigration inspector
+at JFK airport.
+    In fact, I think that was one of the first places I met
+you, along the line.
+    Mr. Cutler has served in many positions, including as
+senior special agent, and was assigned to the Organized Crime
+Drug Enforcement Task Force. Mr. Cutler retired from the INS in
+February 2002 after a career that spanned more than 30 years.
+    And our last witness, Mr. Daniel Griswold, is the director
+of the Center for Trade Policy Studies at Cato Institute here
+in Washington, D.C. He is the author of the Cato book, ``Mad
+About Trade: Why Main Street Should Embrace Globalization.'' He
+received his bachelor's degree in journalism from the
+University of Wisconsin at Madison and a diploma in economics
+and a master's degree in the politics of the world economy from
+the London School of Economics.
+    So you see we have a very distinguished group of witnesses
+today. And I wish we could start the testimony now, but because
+we are about 7 minutes away from a vote we will recess and
+reconvene. And, hopefully, there will be some Members that will
+be able to get back.
+    So, with that, we will recess until we finish voting. Thank
+you.
+    [Recess.]
+    Mr. Gallegly. I call the Subcommittee back to order.
+    Thank you for your patience. The storm is moving in, so we
+are going to move on as quickly as we can. And we have lost
+several of our Members, but we have the most important one,so.
+    Mr. Kibble, we will recognize you. For the sake of trying
+to expedite things, I would ask you to please work with us on
+the 5-minute thing, and appreciate your patience. Thank you.
+ TESTIMONY OF KUMAR KIBBLE, DEPUTY DIRECTOR, U.S. IMMIGRATION
+   AND CUSTOMS ENFORCEMENT, DEPARTMENT OF HOMELAND SECURITY,
+                         WASHINGTON, DC
+    Mr. Kibble. Chairman Gallegly, distinguished Members of the
+Subcommittee, to the extent they are here, on behalf of
+Secretary Janet Napolitano and Assistant Secretary John Morton,
+I want to thank you for the opportunity to discuss ICE'S
+worksite enforcement efforts.
+    DHS is pursuing an aggressive strategy with respect to
+worksite enforcement. Our strategy focuses on employers that
+knowingly violate the law, deterring those who are tempted to
+violate the law, and offering easy tools, like E-Verify, to
+help employers comply. We do this through the robust use of I-9
+inspections, civil fines, and debarment.
+    The success of our approach to worksite enforcement is
+clear in the numbers. In fiscal year 2010, ICE opened a record
+2,746 worksite enforcement investigations. This more than
+doubled the number from 2008. We also issued more notices of
+inspection to employers, quadrupling the number from 2008. We
+issued a record of final orders directing businesses to pay
+fines amounting to just under $7 million; saw a record $36.6
+million in judicial fines and forfeitures; and debarred a
+record 97 unscrupulous businesses and 49 individuals,
+preventing them from doing business with the government.
+    Our approach also prioritizes the criminal prosecution of
+the worst employers that knowingly hire illegal workers; abuse
+and exploit their workers; engage in harboring, smuggling, and
+trafficking of workers; and also facilitate document or benefit
+fraud.
+    The main reason people come to the United States illegally
+is for the opportunity to work. By focusing on employers who
+provide jobs to illegal aliens, we are attacking one of the
+root causes of illegal immigration. By following our tough
+approach, we are creating a culture of compliance--a culture in
+which employers seek to get on the right side of the law and
+hire lawful workers.
+    As the clearest example that this approach is working, look
+to Tyson Foods. Just last week, Tyson became one of ICE's IMAGE
+partners. That program, or the ICE Mutual Agreement Between
+Government and Employers, is a partnership that helps big and
+small companies maintain a lawful workforce and protect
+themselves from fraud.
+    Tyson is a Fortune 500 company, with 115,000 employees, and
+is the world's largest meat processor. They are a leader of
+industry. A decade ago, they were investigated and indicted for
+their hiring practices. Today, they proudly stand with us as an
+example of a company that knows that getting right with the law
+is good for business, good for workers, and good for the
+country. We at ICE can't wait to find the next Tyson Foods.
+    In short, our approach is working.
+    I am aware of the concerns raised about ICE's overall
+number of administrative arrests at worksites, and I would
+respond with a few points.
+    First, our number of administrative arrests at worksites
+cannot and should not be considered in a vacuum. Our worksite
+efforts have been part of a broader enforcement strategy that,
+for the last 2 years, has resulted in the removal of more
+illegal aliens from the United States than ever before.
+Moreover, a record number of those were criminal convicts.
+Whether we are apprehending people at worksites or apprehending
+them elsewhere, we are apprehending and detaining and removing
+more people than ever in the Nation's history.
+    Second, we are more strategic in our approach than ever. It
+costs approximately $12,500 to arrest, detain, and remove an
+individual from the United States. So we have focused our
+limited resources wisely and successfully removed a record
+number of criminals last year. Our approach has made
+communities safer.
+    Finally, we have more resources along the Southwest border
+than ever. That is more staffing, technology, and
+infrastructure protecting the border and slowing the flow of
+illegal immigration.
+    In short, we are committed to an overall approach to
+enforcement that is working. We look forward to continuing to
+build on our current successes and working with you through the
+remainder of this fiscal year and beyond.
+    Thank you again for this opportunity, and I welcome any
+questions you may have.
+    [The prepared statement of Mr. Kibble follows:]
+                   Prepared Statement of Kumar Kibble
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+                               __________
+    Mr. Gallegly. Thank you very much, Mr. Kibble. And thank
+you for being so succinct with your testimony.
+    Mr. Krikorian?
+  TESTIMONY OF MARK KRIKORIAN, EXECUTIVE DIRECTOR, CENTER FOR
+              IMMIGRATION STUDIES, WASHINGTON, DC
+    Mr. Krikorian. Thank you, Mr. Chairman.
+    There are 14.5 million Americans looking for work and 26
+million who are unemployed or underemployed. Yet, immigration
+policy takes no note of these facts.
+    According to a report just last week from Northeastern
+University, over the past 2 years, employment declined in the
+United States by more than 6 million jobs, and yet, more than 1
+million new immigrants got jobs during that time.
+    Only about a third of those new immigrant job holders were
+illegal immigrants. Now, what that means is that legal
+immigration is a big part of this disconnect between employment
+and immigration enforcement. But that is not something that
+this Administration or any other can deal with on its own.
+    But the one-third of those new job holders who are illegal
+immigrants is a different matter altogether. And the problem
+there is not a badly designed immigration system but, rather, a
+lack of enforcement of existing laws by the executive branch.
+    As part of the current Administration's April 2009 worksite
+enforcement strategy, real worksite enforcement has declined
+significantly, as Chairman Smith spelled out in his opening
+statement. What has increased in this area is audits of
+employee I-9 forms and the number and total dollar amount of
+fines against employers.
+    Now, such audits and fines are by no means a bad thing, and
+increasing them has been a positive step. The problem is, they
+are only good as far as they go, and they don't go that far.
+    By limiting worksite enforcement to the personnel office,
+the current strategy foregoes the benefits of a full-spectrum
+enforcement approach that includes both audits and raids, both
+fines and arrests, focusing on both employers and employees.
+One colleague observed to me just yesterday that the current
+ICE focus on audits is as effective as the FBI doing gang
+suppression by just giving talks at high schools, without
+actually arresting any gang members.
+    The benefits of full-spectrum enforcement are clear from
+recent experience. First of all, it opens up jobs for
+Americans. As an example there--and I spell it out more in my
+written testimony--is the Smithfield pork plant in Tar Heel,
+North Carolina, which was raided in 2007. As a result of that
+and the removal of illegal workers there, Americans were able
+to be hired.
+    Initially, when the plant opened, American workers were
+most of the staff. But, over time, slowly but steadily,
+Americans were removed, replaced by illegal workers. And what
+happened was, as a result of the raids, just the Black American
+share of the workforce went from 20 percent before the raids to
+60 percent after the raids.
+    A second benefit of comprehensive worksite enforcement,
+instead of today's more selective and limited approach, is that
+it raises the wages of blue-collar American workers. And we
+have seen this very clearly as a result of the raids on the six
+Swift meatpacking plants in 2006. And what happened after those
+raids was that the level of wages and bonuses at those plants
+increased by 8 percent as a result of that raid. It was an 8
+percent raise for legal workers because of that immigration
+raid.
+    A third benefit of full-spectrum enforcement is that it is
+necessary to gather evidence on crooked employers. In other
+words, it is tough to go after employers if you are not
+arresting and not doing raids and arresting the illegal
+workers, who are then able to provide information.
+    We saw that most clearly in the Agriprocessors meatpacking
+plant raid in Iowa. Before the raid, State officials had been
+trying to gather information on the various abuses in that
+plant and had really gotten nowhere. As a result of the raid,
+it tore away the curtain and exposed the plant's squalor and
+mass illegality, leading to arrests of management for criminal
+child labor and other violations. Merely auditing that plant's
+personnel records, while scrupulously avoiding any arrests of
+illegal immigrants, might well have meant that, today, that
+Agriprocessors plant would still be abusing children on its
+factory floor.
+    And, finally, a full-spectrum worksite enforcement approach
+is necessary to turn off the magnet of jobs that attract
+illegal immigrants in the first place. The point of enforcement
+is not to arrest and deport every illegal worker and punish
+every illegal employer. The point is to make it clear to them
+that there is a significant chance that could happen, so you
+end up with voluntary compliance with the law. This is the way
+it works in any other kind of enforcement area--taxes or
+traffic laws or what have you.
+    But if illegal immigrants are not being arrested because we
+are not having raids, we don't have a full-spectrum worksite
+enforcement, there just isn't that much for workers or illegal
+workers or illegal employers to fear. And, in a sense, what we
+are doing is we are sending the signal that it is not really
+that big a deal to be an illegal alien working or to be hiring
+illegal immigrants. And when we send that kind of signal,
+illegal workers and illegal employers understand what we are
+telling them, and they continue doing what they are doing.
+    Thank you.
+    [The prepared statement of Mr. Krikorian follows:]
+                  Prepared Statement of Mark Krikorian
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+                               __________
+    Mr. Gallegly. Thank you, Mr. Krikorian.
+    Mr. Cutler?
+ TESTIMONY OF MICHAEL W. CUTLER, SENIOR SPECIAL AGENT (RET.),
+   IMMIGRATION AND NATURALIZATION SERVICE, NEW YORK DISTRICT
+                             OFFICE
+    Mr. Cutler. Thank you, Mr. Chairman. I would like to thank
+both you and your colleagues for your leadership in immigration
+enforcement and for this invitation to be here today.
+    The effective enforcement of our Nation's immigration laws
+and the creation of an immigration benefits program that has
+real integrity are vital components of the war on terror and in
+efforts to protect our Nation and our citizens from various
+transnational criminal organizations such as the Mexican drug
+cartels. Simply stated, we cannot protect our Nation or our
+citizens from these and other threats while our borders remain
+porous and millions of illegal aliens, whose true identities
+are unknown and unknowable, live and work in communities
+throughout the United States.
+    Our Nation's immigration laws can only be effectively
+enforced if all elements of the enforcement program and the
+immigration benefits program operate cooperatively in a unified
+system.
+    The majority of illegal aliens enter our country seeking
+unlawful employment. Aliens who run our borders often pay
+pernicious smugglers, who may force them to facilitate the
+smuggling of narcotics into our country. The revenue that the
+smuggling trade provides finances criminal organizations
+throughout the world.
+    Illegal aliens are likely to pay other criminals, such as
+fraud document vendors and identity thieves as well, in order
+to secure identity documents.
+    Many illegal aliens are young men who, at least initially,
+leave behind their wives and girlfriends. This large population
+of illegal aliens provides potential clientele for houses of
+prostitution that leads to more crime, more human trafficking,
+and more unspeakable exploitation.
+    Effective law enforcement requires deterrence to be an
+integral part of the strategy. Effective worksite enforcement
+must seek to deter unscrupulous employers from intentionally
+hiring illegal aliens, but it must also seek to deter illegal
+aliens from entering our country in the first place looking for
+jobs.
+    The passage of the Immigration Reform and Control Act, or
+IRCA, of 1986 included provisions that, for the first time,
+deemed the intentional hiring of illegal aliens to be a
+violation of law. It represented a balanced approach to
+deterring the employment of illegal aliens by penalizing the
+employers. Today, however, what we are seeing is an effort to
+simply go after the employer and not the illegal alien. So this
+doesn't have the balanced approach that the law should
+provide--that field operations should provide.
+    Effective worksite enforcement investigations would take
+significant pressure off our Nation's porous borders and would
+also staunch the flow each year of tens of billions of dollars
+of money that are wired or otherwise transmitted by illegal
+aliens from the United States to their home countries, thereby
+adding to our burgeoning national debt. This is money that is
+not spent in the United States, money that is not invested in
+the United States, money that is not earned by United States
+citizens or resident aliens.
+    And at the present time, as we have heard today, so many
+Americans are having an increasingly difficult time of trying
+to support themselves and their families. Everyone talks about
+the need to create new jobs, but if the jobs are created but
+then don't go to American citizens, our citizens and our Nation
+don't benefit from these new jobs.
+    While I am not an economist, I am convinced that increasing
+resources to the worksite enforcement program would save our
+Nation's economy more money than would be invested in such an
+increase in resources. An effective worksite program would also
+provide important national security and community safety
+benefits.
+    Terrorists and criminal aliens often seek employment as a
+means of embedding themselves in a community. Terrorists and
+criminals are often described by the jobs that they held at the
+time that they were arrested, jobs that provided them with
+money, camouflage, and mobility. Aliens engaged in terrorism or
+criminal activities often seek to acquire lawful immigration
+status by committing immigration benefit fraud. And this is an
+issue that I hope that you will delve into in detail in future
+hearings.
+    But it is important to note that, as an INS special agent,
+I often apprehended criminal aliens on the jobs where they
+worked. These aliens had lengthy conviction records and may
+well have been previously deported, but they were working
+illegally in jobs that enabled them to hide in plain sight.
+    Leaders at the DHS often note their concerns about illegal
+aliens working at critical infrastructure, and they talk about
+airports and military bases and so forth. Well, recently,
+officials at the DHS raised concerns about Mumbai-style attacks
+being carried out in the United States that would target hotels
+or places where large numbers of people congregate. And there
+was also stated concerns about an al Qaeda operation that would
+seek to poison people. Given that, it would logically follow
+that critical infrastructure should also include food-
+processing plants.
+    In my nearly 40 years of involvement with the immigration
+issue, I have not seen any Administration distinguish itself by
+effectively securing our borders or enforcing our immigration
+laws. However, I believe the current Administration has all but
+rolled out the welcome mat to illegal aliens, frankly. High-
+level members of the Administration have stated that illegal
+aliens would not face the threat of arrest in most of these
+worksite investigations.
+    Last week, the Wall Street Journal talked about the
+Employment Compliance Inspection Center that is supposed to
+facilitate the auditing of I-9's and supporting documents.
+Again, going after that is worthwhile, but if you are missing
+the idea of arresting the illegal aliens, then you are missing
+the boat.
+    Furthermore, the President and Members of both houses of
+Congress have spoken frequently about the need to place illegal
+aliens on a pathway to U.S. citizenship, thereby all but
+declaring that illegally entering our country should be a
+prerequisite for United States citizenship.
+    I also want to touch briefly on the lawsuit filed by the
+Justice Department against the State of Arizona to try to block
+Arizona from enforcing its own laws. Again, the message is a
+dangerous one, because it offers more encouragement to illegal
+aliens and those foreign nationals who aspire to become illegal
+aliens in our country.
+    If morale was low when I was an INS special agent because
+of the reasons that we discussed earlier, the lack of resources
+and so forth, then I would imagine morale must be incredibly
+low at this point in time.
+    Final point: Prior to the Second World War, the Department
+of Labor was responsible for enforcing our immigration laws.
+The concern was that an influx of large numbers of foreign
+workers would drive down wages and worsen the working
+conditions of the American worker. And, indeed, our laws still
+reflect that it is illegal to hire foreign workers if, in so
+doing, harm is done to the American workforce.
+    Effective worksite enforcement efforts can protect our
+Nation and our workers and turn off the power to the magnet
+that draws so many illegal aliens to our country. The time has
+long since come for our government to actually provide
+resources and leadership to properly enforce these important
+provisions of our laws. And I am gratified that you are holding
+this hearing.
+    I thank you for the opportunity.
+    [The prepared statement of Mr. Cutler follows:]
+                Prepared Statement of Michael W. Cutler
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+                               __________
+    Mr. Gallegly. Thank you, Mr. Cutler.
+    Mr. Griswold?
+TESTIMONY OF DANIEL GRISWOLD, DIRECTOR, CENTER FOR TRADE POLICY
+            STUDIES, CATO INSTITUTE, WASHINGTON, DC
+    Mr. Griswold. Chairman Gallegly, Chairman Smith, Ranking
+Member Lofgren, Members of the Committee, thank you very much.
+    I am confident we all share the goals of reducing illegal
+immigration, securing our borders against those who would do us
+harm, and promoting economic growth and job creation. With
+those objectives in mind, I believe that focusing primarily on
+worksite enforcement will continue to be an expensive
+distraction until we reform our immigration laws to reflect the
+realities of America's 21st-century labor market.
+    Our policy of relying solely on enforcement of current
+immigration law has failed. This is true for both border and
+interior enforcement. Since 1992, our spending on border
+enforcement has gone up more than 700 percent. The number of
+agents at the border has gone up fivefold. Since the
+Immigration Reform and Control Act of 1986, U.S. employers have
+been subject to fines for knowingly hiring undocumented
+workers. Yet, during two decades of increased enforcement, the
+number of illegal immigrants in this country has roughly
+tripled.
+    Our enforcement-only approach is at odds with the economic
+and demographic realities of our dynamic American economy. Our
+economy routinely creates hundreds of thousands of net new jobs
+each year that require only short-term, on-the-job training. I
+am talking about home health aides, food preparation and
+serving workers, retail salespersons, landscaping and
+groundskeeping workers, waiters and waitresses.
+    At the same time, the number of Americans who have
+traditionally filled such jobs continues to shrink. Over the
+last decade, the number of adult Americans in the workforce
+without a high school diploma has dropped by 3 million, and
+that number is going to continue to drop. It is good news, but
+it adds to this problem.
+    Immigrants fill the growing gap between expanding low-
+skilled jobs and the shrinking pool of native-born Americans
+who want to fill them. Immigrant workers enable important
+sectors of the U.S. economy, such as retail, agriculture,
+landscaping, restaurants and hotels, to expand, to attract
+investment, and to create middle-class jobs in management,
+bookkeeping, marketing, and other areas that employ native-born
+Americans.
+    It is misleading to assert that every low-skilled immigrant
+we can round up and deport will mean jobs for an unemployed
+American. The real economy doesn't work that way. Low-skilled
+immigrants, whether legal or illegal, do not compete directly
+against the large majority of American workers.
+    American companies hire immigrant workers to fill millions
+of low-skilled jobs because there are simply not enough
+American workers willing to fill those same jobs. The pay and
+working conditions in many of these jobs do not match the
+qualifications and aspirations of the large majority of
+Americans currently looking for employment in our recovering
+economy.
+    We cannot enforce our way out of unemployment. There is no
+causal relationship between the inflows of immigration and
+higher overall unemployment in the U.S. economy. If anything,
+more aggressive enforcement against low-skilled immigration
+will arguably have a negative effect on our economy and the
+jobs and incomes of American households.
+    Removing millions of low-skilled workers from our labor
+force through enforcement would reduce the incentives for
+investment in the affected industries. It would reduce the
+relative job openings in more skilled positions, disrupting
+employment for native-born Americans.
+    In agriculture, for example, the USDA estimates there are
+3.1 related jobs off the farm for every job on the farm.
+Eliminating the on-farm jobs would put at risk many more jobs
+paying middle-class wages and employing native-born Americans.
+    A 2009 Cato study found that a 30 percent reduction in low-
+skilled immigration to the United States through more vigorous
+interior enforcement would cause a drop in the incomes of
+American households by $64 billion a year. In contrast, the
+same study estimated that immigration reform that allowed more
+low-skilled immigrants to enter the United States legally could
+boost the incomes of American households by $180 billion a
+year.
+    The best approach to reducing illegal immigration would be
+to expand opportunities for legal immigration while targeting
+enforcement against terrorists, criminals, and others who
+continue to operate outside the system.
+    We know from experience that legal immigration, if allowed,
+will crowd out illegal immigration. Here we can learn two
+valuable lessons from the Bracero program, which allowed
+Mexican workers to enter the United States temporarily from
+1942 to 1964.
+    One lesson is that temporary workers should be given
+maximum mobility to change employers. The fatal flaw of the
+Bracero program was that it tied workers to specific employers
+as a condition of the visa. This gave too much leverage to
+employers, resulting in abuses that led Congress to shut down
+the program.
+    The more positive lesson from the Bracero program is that,
+for all its shortcomings, it did provide a legal alternative to
+illegal immigration.
+    Early in the 1950's, we were apprehending a million people
+a year at the border because the program offered an
+insufficient number of visas to meet the labor demands of a
+growing U.S. economy. Instead of merely redoubling our
+enforcement efforts, Congress dramatically increased the number
+of visas to accommodate demand. The result: Apprehensions at
+the border dropped more than 90 percent.
+    Back then, as we could expect now, foreign-born workers
+rationally chose the legal path to entry when it was available.
+When the Bracero program was abolished in 1964, legal
+immigration began to rise inexorably, and that has continued to
+the present time.
+    To sum up, Mr. Chairman, a program of legalization would
+transform the enforcement debate. Instead of wasting resources
+on a futile effort to root out millions of low-skilled
+immigrant workers who are productively contributing to our
+Nation's economy, we could focus our enforcement efforts on
+apprehending those who want to do us harm.
+    Large-scale illegal immigration will end only when
+America's immigration system offers a legal alternative,
+consistent with the underlying realities of our labor market.
+    Thank you.
+    [The prepared statement of Mr. Griswold follows:]
+                 Prepared Statement of Daniel Griswold
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+                               __________
+    Mr. Gallegly. Thank you very much, Mr. Griswold.
+    Mr. Kibble, I was interested in your comments relative to
+the significant increase in removals or deportation. Are these
+formal deports, or are they voluntary deports, or are they a
+letter telling a person that they have to leave, or is it a
+green van trip to the border and released? Could you give me a
+definition of a removal or a deport?
+    Mr. Kibble. Sir, when we reference removals, we are talking
+to the formal orders of removal as well as voluntary returns.
+And when you look at our results over the last 2 years, we have
+removed--and this means people leaving the country--we have
+removed more than we ever have in our history.
+    Mr. Gallegly. Well, what is the percentage of voluntary
+removals versus formal deports?
+    Mr. Kibble. I don't have that number readily available.
+    Mr. Gallegly. I remember listening to Janet Reno not too
+many years ago, when she said, in the southern California area,
+the U.S. Attorney's district there, that their policy was that
+they didn't initiate any formal deports until after there had
+been a second felony conviction.
+    Have you ever heard that before, from a policy standpoint,
+of a United States attorney?
+    Mr. Kibble. I am not familiar with that, sir. But----
+    Mr. Gallegly. What is the criteria for formal deportation?
+    Mr. Kibble. If someone is unlawfully in the country, they
+enter into proceedings, and they receive their due process.
+And, ultimately, they, you know, they may have a----
+    Mr. Gallegly. So anyone that doesn't agree to voluntary
+deportation, you would immediately start the process, keep them
+in custody until they were formally deported?
+    Mr. Kibble. Sir, we would place them in removal
+proceedings. However, we have a limited detention space, so we
+have to make smart----
+    Mr. Gallegly. How many show up for their dates, what
+percentage?
+    Mr. Kibble. I don't have that number handy----
+    Mr. Gallegly. Well, I could just tell you, I had a visit to
+Kennedy a few years ago and also to Miami. And when they had
+individuals come into the country and they would appeal the
+denial of entrance, of those that were considered low flight
+risk and were given a date and a paper to appear, the ones that
+were considered low flight risk, 94 percent never returned.
+That is pretty well-documented, and I did a white paper many
+years ago on that. But----
+    Mr. Kibble. May I respond, sir?
+    Mr. Gallegly. Sure.
+    Mr. Kibble. We are essentially resourced to remove roughly
+400,000 people a year. So we have tried to take that resourcing
+and use it wisely, prioritizing threats to public safety and
+national security; border violators, recent border violators;
+as well as immigration fugitives and others that try to game
+the system in terms of our border controls.
+    I think every one of those removals----
+    Mr. Gallegly. I don't doubt that. But ``every one'' and ``6
+percent'' is a different situation.
+    My concern is, what is the real definition of removal? Are
+they really removed? Are they given notice? Are they put into
+a----
+    Mr. Kibble. They are removed from the country, sir.
+    Mr. Gallegly. Okay. What is your recidivism rate? How many
+do you--now you have great IDENT system, right? And the IDENT
+is pretty conclusive, when you re-arrest someone, it is pretty
+easy to tell. Could you tell me if you have ever had anyone
+that re-entered the country that had been deported?
+    Mr. Kibble. Oh, of course we have folks that have re-
+entered the country that had been deported, sir.
+    Mr. Gallegly. More than 10 times, the same person? Ever
+heard of that?
+    Mr. Kibble. I know there have been instances of that.
+    But, I mean, to the larger point, sir, I mean, we are doing
+everything we can with the resources that are available. And we
+are breaking records, removing----
+    Mr. Gallegly. But the question is, a formal deport versus a
+voluntary deport, the difference, as I understand it--and
+correct me if I am wrong--if you give them the option of
+voluntary deportation and then they re-enter the U.S., it is
+basically, ``Well, hey, you have to go home again.'' However,
+if you have been formally deported and you re-enter the
+country, it is a felony; is that not correct?
+    Mr. Kibble. Yes, sir. I mean, a re-entry after deportation
+is a violation----
+    Mr. Gallegly. Okay, right.
+    One other quick question before my time runs out. The GAO
+has expressed criticism on I-9 audits, saying that businesses
+simply view these civil fines as kind of a part of doing
+business, just like you would to pay for any other type of
+overhead costs.
+    Would you say that is a fair assessment?
+    Mr. Kibble. No, sir, I would not. If you look at the fines
+as they were a couple years ago, we issued 18 final orders for
+about $675,000. That has dramatically increased to----
+    Mr. Gallegly. But are they----
+    Mr. Kibble [continuing]. Almost $7 million.
+    And, sir, the way they are contesting these in court and
+entering into settlements and aggressively trying to negotiate,
+it is clear to me that they are taking these fines very
+seriously.
+    We have also reformed the system so that there is less room
+for mitigation, as we have seen in years past. So these are
+meaningful.
+    Mr. Gallegly. Do you find that courts are usually going the
+maximum, or are they a little more lenient with--whether it is
+a, let's say, a $500 fine per head or maybe even a $100 fine?
+    Mr. Kibble. Sir, in the context of civil fines, we are
+generally setting those based on the violations that we
+identify during our audits. In the context of judicial fines
+and forfeitures, there, again, we are breaking records--$36.6
+million in judicial fines and forfeitures.
+    Mr. Gallegly. Has it been effective?
+    Mr. Kibble. Sir, I believe the strategy is working. There
+is always room to continue to mature it. But, to the extent
+that we can touch more businesses with both criminal and civil
+sanctions and also outreach and training for the employers that
+want to be on the right side of the law, we will establish that
+culture of compliance that we are looking for.
+    If I could just address one other point you mentioned, sir,
+having to do with the recidivism. Because, again, worksite has
+to be looked at in the context of the broader immigration
+enforcement strategy. We have unprecedented numbers of
+prosecutions for illegal re-entry. In fact, we are using our
+own attorneys, almost 55 of them, to help the U.S. Attorney's
+Office in prosecuting these violations of re-entry.
+    Mr. Gallegly. Thank you very much.
+    You know, I am going to try to lead by example around here,
+and I overstayed my red mark, and I apologize for that.
+    The gentlelady from California, Ms. Lofgren.
+    Ms. Lofgren. Thank you, Mr. Chairman. I just have a few
+questions of my own.
+    First, Mr. Krikorian, just briefly, you, in your testimony
+today, discussed a recent study by the Center for Labor Market
+Studies at Northeastern University that purported to
+demonstrate that recent immigrants were gaining employment
+while Americans were losing their jobs. And then you cited a
+story by Reuters in your written testimony, not the report
+itself.
+    Have you seen the report itself and analyzed it?
+    Mr. Krikorian. No. I have looked for it. No, I am not sure
+it is--I think they did it for Reuters, so I am not----
+    Ms. Lofgren. Well, I asked my staff to call the Center and
+ask for the report, and they refused to give it to us. And they
+said it isn't being made public. I just wondered if you had a
+copy----
+    Mr. Krikorian. No, I do not.
+    Ms. Lofgren [continuing]. If we could get it from you.
+    Mr. Krikorian. It looked like--it said ``exclusive for
+Reuters,'' so I assume they paid for it or something like that.
+    Ms. Lofgren. Yeah. I will just advance my view that if
+something can't ever be examined by people, I am not going to
+rely on it.
+    Mr. Griswold, we appreciate your testimony. And I am
+wondering, the Center for American Progress reported that, in
+their analysis, the direct cost on government to deport all
+undocumented workers would be $285 billion in 5 years. Now,
+that, as I understand it, considered apprehension, detention,
+processing, transportation, enforcement costs, but it didn't
+take a look at the broader impact, what would the impact be on
+the economy, of pulling out 11 million people.
+    Have you looked at it? Do you have insights that you could
+share on what those costs would be to the American public?
+    Mr. Griswold. Yeah. In a word, the costs would be huge.
+    It is interesting: The Cato study that I mentioned found a
+significant benefit for American households if we had increased
+legal immigration. It found a cost of $64 billion a year, just
+from reducing low-skilled immigration by 30 percent. Those
+costs would increase significantly if we were able to reduce it
+even more.
+    An interesting thing, Ms. Lofgren, is that, 6 months after
+the Cato study came out, the Center for American Progress came
+out with another study that showed very similar economic gains
+from a legalization program. And so, here you have the Cato
+Institute--libertarian, free market--and the Center for
+American Progress--center-left--coming to the same conclusion,
+that low-skilled immigration is good for the U.S. economy. And
+suppressing it through, I think, futile efforts, but even if
+they could work and remove millions of low-skilled workers, we
+would pay a very high price as an economy. And, as you have
+pointed out and others have pointed out, it would cost jobs in
+upstream and downstream industries, as well.
+    Ms. Lofgren. Let me ask you this, if I can. You know, I am
+of the opinion--and I am glad that Mr. Kibble is here.
+    I am sorry I missed your testimony. I was detained coming
+back from the floor, but I did have a chance to read it and
+review it. And I appreciate that you have been given a job to
+do, you know, which is to enforce the laws we have. You have
+not been asked or tasked to reform the laws that we have. That
+is our job. And so, I am not going to criticize you for doing
+your job as outlined. But it just seems to me that it is a
+losing effort.
+    I remember the first hearing that we had when I assumed the
+Chair of the Immigration Subcommittee and we had the career
+head of the border patrol as a witness, who was a very crusty,
+interesting guy. And it was his testimony to us that, if we
+could get the busboys and nannies out of the line, crossing
+illegally in the desert, he would appreciate it, so he could
+focus in on the drug dealers and the traffickers and the like.
+    But he also suggested that we can't repeal the law of
+supply and demand. You know, we have failed to reform our laws
+so that this immigration system meets our needs, that it serves
+America's needs. And, consequently, we have a situation that is
+chaotic when we should instead have order.
+    So I guess this isn't a question, more a statement of
+appreciation for you, Mr. Kibble. All of the stats--the number
+of people incarcerated--it is unprecedented numbers of people
+who have been deported. We are spending more money on the
+border today than in the history of the United States. We have
+more Border Patrol agents on the border than in the history of
+the United States. And yet we have this problem because we have
+failed--we, the Congress, have failed--to come to grips with
+our need to reform the system so it actually works for
+Americans.
+    And, with that, the light is on. I would yield back, with
+thanks for Mr. Kibble and all the other witnesses. We don't see
+everything eye to eye, but we do appreciate your volunteering
+to testify here before us today.
+    Mr. Gowdy. [Presiding.] Thank you.
+    At this point, I will recognize myself.
+    Special Agent Kibble, help me understand the dichotomy
+between misdemeanors and felonies, if they exist, with respect
+to immigration violations. Are there felonies and misdemeanors
+that employers could be charged with?
+    Mr. Kibble. Yes, sir. In fact, the strategy factors in--one
+of the challenges in terms of criminal investigations of
+employer is that, in and of itself, knowingly hiring can be a
+misdemeanor offense. When we consider other aggravating
+factors, such as other egregious employment schemes that
+include harboring, smuggling, trafficking, then it rises to a
+felony violation. And, quite frequently, I mean, with limited
+resources, working with the U.S. Attorney's offices----
+    Mr. Gowdy. Well, that is what I want to go to right now.
+How many felony criminal matters were opened in 2010 with
+respect to employers?
+    Mr. Kibble. Well, we charged 196.
+    Mr. Gowdy. A hundred and ninety-six.
+    Mr. Kibble. I am sorry. What year did you ask, sir?
+    Mr. Gowdy. Employers.
+    Mr. Kibble. Last fiscal year, though?
+    Mr. Gowdy. Yes, sir, 2010. And those were criminal matters
+that were opened or those were indictments?
+    Mr. Kibble. Those were criminal arrests and indictments. If
+criminally charged----
+    Mr. Gowdy. How many matters were opened and declined by the
+United States Attorney's Office?
+    Mr. Kibble. I don't have those numbers, sir, but I can go
+back and look into it.
+    Mr. Gowdy. Well, I guess what I am getting at is I am
+trying to understand whether this is a DOJ, a prosecutorial
+issue, where they are declining matters that you have
+investigated and put time and effort into, or if this is an
+administrative decision that has been made, not to go after
+employers?
+    Mr. Kibble. Oh, no, sir. We are pursuing--I have been doing
+this for a little while now. As far as criminal charges against
+employers, we are pursuing them as aggressively as I have seen
+it in my personal experience. And, again, we have record-
+breaking numbers to show for that.
+    Mr. Gowdy. More criminal or civil pursuits?
+    Mr. Kibble. Well, criminal charges against the employer,
+but then also record-breaking achievements in terms of our
+civil efforts to removal people from the country.
+    Mr. Gowdy. Correct me if I am wrong. Employers sometimes
+have the option of paying a civil fine and avoiding criminal
+responsibility?
+    Mr. Kibble. Well, sir, it is a multipronged strategy. And,
+oftentimes, the employers are in a tough spot in terms of
+having to triage and figure out whether documents that have
+been provided by the employee--by the illegal worker are, in
+fact, correct. So, as in any other white-collar crime
+investigation, it takes time to sort through that. And, in many
+instances, we may not be able to establish to meet that burden,
+in terms of knowledge on the part of the employer.
+    Mr. Gowdy. Is there a different standard of proof required
+for the Administration of a civil fine than a criminal
+conviction?
+    Mr. Kibble. Well, the civil fine, sir, is tied to the
+inspection of the Form I-9's. And there are technical and
+substantive violations. And after we do an audit, we will work
+with the businesses for a period of 10 days to resolve any
+technical violations.
+    But then, if we have substantive violations that relate
+to--that make it difficult for us to verify a workforce, then
+we can fine for that violation, up to $1,100 a violation.
+    Mr. Gowdy. How many employers went to the Bureau of Prisons
+last year for hiring illegal immigrants?
+    Mr. Kibble. I don't know--I don't have the conviction of
+sentencing stats readily available, sir.
+    Mr. Gowdy. Guess. Twenty? Ten? Five?
+    Mr. Kibble. Sir, I mean, we criminally charged 196, but
+they are working their way through the process.
+    Mr. Gowdy. Actual employers, people, not corporations,
+people.
+    Mr. Kibble. No, people. Employers, human resource managers.
+    Mr. Gowdy. A hundred and ninety-six?
+    Mr. Kibble. I beg your pardon?
+    Mr. Gowdy. A hundred and ninety-six in 2010?
+    Mr. Kibble. A hundred and ninety-six, sir, we criminally
+charged.
+    Mr. Gowdy. You will agree, I hope, that criminal
+consequences get people's attention more so than civil
+consequences?
+    Mr. Kibble. Yes, sir, they do.
+    Mr. Gowdy. There is a full range, a panoply of negative
+consequences that go along with a criminal convention that
+don't exist with a civil one.
+    Mr. Kibble. That is correct, sir.
+    Mr. Gowdy. Are you convinced that your department and the
+United States Attorney's Office are as aggressively pursuing
+the employers themselves as can be done?
+    Mr. Kibble. Sir, with the tools that are available,
+absolutely.
+    However, I would add that part of getting to that
+deterrence that we were looking for, to the point you are
+alluding in terms of the importance of a criminal charge, it is
+also important that we touch as many businesses as we can so
+that they all feel that, at one point or another, they could be
+engaged by ICE. And that is going to get us to a culture of
+compliance----
+    Mr. Gowdy. But you concede with me, as a wonderful law
+enforcement officer, which I am sure you are, that nothing gets
+people's attention quite like seeing a colleague go to prison,
+agreed?
+    Mr. Kibble. Absolutely. But this is an issue, though, that
+spans--that is more complex than that. I mean, we are----
+    Mr. Gowdy. Tell me how it is more complex. We do it in
+every other category of crime. We send people to the Bureau of
+Prisons, whether it be for 6 months or 6 years or life. And
+that is how we deter criminal conduct.
+    Mr. Kibble. That is absolutely correct, sir. And that is
+why we have record-breaking achievements in terms of our
+criminal prosecutions of employers.
+    My point is, if we really want to deter and create a
+culture of compliance much more broadly--that is why the
+aggressive use of I-9's are so effective in terms of ultimately
+getting these employers, holding them accountable and getting
+them on the right side of the law.
+    Mr. Gowdy. My time is up.
+    I will recognize the gentleman from Puerto Rico, Mr.
+Pierluisi.
+    Mr. Pierluisi. Thank you, Mr. Chairman.
+    As my colleagues and I travel around our Nation, we hear a
+consistent message from the American people: Fix our broken
+immigration system by enacting comprehensive reform.
+    Sensible worksite enforcement designed to identify and
+penalize those employers who violate Federal law is one
+important aspect of our Nation's approach to immigration
+policy. However, unless we do more, an enforcement-only
+approach will hurt the economy and cost American jobs over the
+long term.
+    Although many people would rather not acknowledge it,
+undocumented workers play an important role in our economy by
+performing jobs that would otherwise largely go unfilled.
+Without their labor, for example, a large percentage of
+America's farms would close, leading to the loss of millions of
+upstream and downstream jobs held by U.S. workers.
+    The undocumented workers who fill agricultural jobs sweat
+and toil for low wages and often work far away from their
+families. Because they have no legal status, often they and
+their employers do not pay taxes. These workers also have no
+rights that they can feasibly exercise, which results in a
+lowering of labor standards for all workers, including native-
+born American workers.
+    If we truly want to help law-abiding businesses and protect
+the rights of all American workers, we will find a way to bring
+undocumented workers out of the shadows and on to the tax
+rolls.
+    The Obama administration should continue to focus its
+worksite enforcement on bad-actor employers who exploit the
+broken immigration system to undermine their competitors. By
+stopping employers who violate immigration and labor laws, our
+government would protect all workers, including native-born
+American workers, and help level the playing field for honest
+businesses.
+    Illegal immigration is not a problem that happened
+overnight, by the way, and we cannot expect the Obama
+administration to solve it overnight, especially without reform
+of our Nation's immigration laws.
+    Let me address my first question--and I know time will
+probably permit just one for now--to Mr. Kibble.
+    I know that, in April of 2009, Secretary Janet Napolitano
+announced the shift in worksite enforcement strategy. As you
+have testified, this strategy included a commitment to
+emphasize enforcement against employers who exploit workers.
+This makes sense because employers who exploit workers are
+trying to game the system. Such employers undercut those who
+are trying to play by the rules. This not only harms good
+employers, but it drives down the wages and working conditions
+for all workers, including immigrants and U.S. citizens alike.
+    Now, I have a statistic that troubles me. Worksite arrests
+have increased from 510 to 4,940 since 2002. That sounds good.
+In this same period of time, there have only been 90 arrests of
+company representatives.
+    If we do not hold employers accountable, how can we expect
+to end this jobs magnet? So that is one question I raise to
+you. I mean, are we really addressing those employers?
+    And, also, if you can expand on the way that ICE identifies
+and targets employers who abuse workers, I will really
+appreciate it.
+    Mr. Kibble. Thank you for the questions, sir.
+    We are aggressively pursuing criminal sanctions against
+employers, particularly with these aggravating factors of
+abusing and exploiting the workforce, harboring, smuggling,
+trafficking. We are going after them very aggressively. And we
+have a number of successes in terms of forced labor and other
+schemes that we have broken up.
+    And, again, I get back to record-breaking results in terms
+of our criminal charges against employers--196. It has never
+been as high as that.
+    To your other point, in terms of the human trafficking, DHS
+has the Blue Campaign. We have quite a focus on dealing with
+human trafficking. And it is important to make the distinction
+between trafficking and smuggling. Smuggling is transportation-
+based. Trafficking is exploitation-based. So where we find
+elements of force, fraud, and coercion, we aggressively pursue
+these trafficking investigations.
+    Now, our investigations start from leads, they start from
+tips, particularly with respect to human trafficking. We have
+18 full-time victim witness coordinators and 350 collateral
+victim witness coordinators. And the point of that is that, to
+successfully prosecute a trafficking scheme, it is important to
+have a victim-centered approach. Because to the extent we can
+enlist the aid of that victim as a witness, we will be able to
+more successfully prosecute the trafficker and, therefore,
+prevent that from occurring again and again.
+    Mr. Pierluisi. Thank you.
+    Mr. Smith. I thank the gentleman from Puerto Rico.
+    And I would recognize the gentleman from Florida, Mr. Ross.
+    Mr. Ross. Thank you, Mr. Chairman.
+    Mr. Kibble, is there any role for State and local law
+enforcement, in terms of worksite enforcement?
+    Mr. Kibble. I mean, to the extent, sir, that, in some
+instances--I just came--I was the special agent in charge in
+Denver. And we have had instances where State and local
+officers, as the front line, may identify schemes or even, in
+fact, egregious employment patterns that are referenced, that
+are referred to us for further investigation.
+    Mr. Ross. Is that more the exception than the rule, would
+you say, that you would have State and local law enforcement in
+that particular capacity?
+    Mr. Kibble. Well, in terms of classical police, yes. But we
+work very closely with a lot of State and local agencies that
+can assist us in terms of validating whether a workforce is
+authorized or not.
+    Mr. Ross. The IMAGE program that has been created that
+allows for employers to voluntarily participate, how has that
+been? Has that been successful, in your experience?
+    Mr. Kibble. I think it has been very successful. There are
+12 best practices that we promote through the IMAGE program.
+And the key here is that there are employers that we are trying
+to penalize, that we are trying to deter, but there are also
+employers that want to do the right thing but they need
+assistance in terms of scrubbing the workforce.
+    So one of the key practices in IMAGE is to promote and
+encourage the use of E-Verify, in terms of validating----
+    Mr. Ross. Right.
+    Mr. Kibble. That is the best tool available for an employer
+to validate whether they have an authorized worker on their
+hands or not.
+    Mr. Ross. Is there anything you would recommend in terms of
+incentivizing or, you know, expanding the opportunities for
+employers to want to participate in IMAGE?
+    Mr. Kibble. In IMAGE?
+    Mr. Ross. Yeah.
+    Mr. Kibble. Well, the training that we offer, I will tell
+you, we have a fairly comprehensive program. Recommending and
+encouraging the use of E-Verify is one of them, but we also
+offer training in detection of fraudulent documents. And this
+is free. We offer training and outreach in sound hiring
+practices. We recommend other practices that help to maintain
+an authorized workforce. We also provide training in anti-
+discrimination to aid the employer, as far as that concern.
+    And we have offered training to roughly 14,000 employers
+through the IMAGE program.
+    Mr. Ross. And it has been successful?
+    Mr. Kibble. Yes, we have been pleased with the results.
+    Mr. Ross. Good.
+    Mr. Krikorian, how would you respond to Mr. Kibble's
+assertion in his preliminary report that, quote, ``Just
+targeting the employers who knowingly break the law is a
+successful strategy to deter unlawful employment when workers
+themselves are not prosecuted and free simply to find new
+jobs''?
+    Mr. Krikorian. Well, I mean, there are two problems with
+that.
+    The first is, unless you are actually arresting the illegal
+immigrant workers, you are not creating the environment within
+which you can see an attrition of the illegal population. In
+other words, they will just walk down the street----
+    Mr. Ross. And take one job after the next one.
+    Mr. Krikorian. But the other side of it is that one of the
+best ways of getting leads and evidence about crooked employers
+is actually to do the raids. In other words, this is why I
+referred to that meatpacking plant in Iowa, that the State
+authorities had just not been able to, sort of, pierce the veil
+and really get effective information on what was going on. It
+was only after the arrests.
+    And they arrested 400 illegal immigrants on a variety of
+genuine criminal charges. These were people stealing American
+children's identities, ruining their credit histories or, if
+they didn't even have credit histories yet, ruining their
+futures. Their ability to get student loans in the future would
+have been compromised. So these were people engaged in serious
+criminal activity.
+    But then they were able to find out much better what was
+going on inside the firm in a way that they just would not have
+been able to had they not conducted that raid.
+    Mr. Ross. You also wrote extensively, I think, about
+modifying driver's licenses to get a better and more secure
+form of ID. Is that something you can expound on, in terms of
+how you think it might be beneficial in worksite enforcement?
+    Mr. Krikorian. Well, obviously, the key to the I-9 process,
+even when it has E-Verify to back it up, is the ID that people
+are showing.
+    Mr. Ross. Right.
+    Mr. Krikorian. And Congress passed the Real ID Act, and
+States have been making real progress in bringing their
+licenses up to Federal standards. And the point there is to
+make sure that, when you present a document to an employer, you
+actually are who you say you are.
+    And because, frankly, most employers who are employing
+illegal immigrants aren't crooks, they don't really know what
+they are doing. They may suspect somebody is an illegal
+immigrant, but there is a limit to what they can do about it.
+    That is why we need, sort of across the board, both better
+standards for driver's licenses, as well as E-Verify and a
+variety of other methods, so that employers will know when a
+job seeker is lying to them and when he is telling the truth.
+    Mr. Ross. Thank you.
+    I see my time is up.
+    Mr. Gowdy. [Presiding.] Thank you, Mr. Ross.
+    The Chair would recognize the gentlelady from Texas, Ms.
+Jackson Lee.
+    Ms. Jackson Lee. Mr. Chairman, thank you.
+    Let me thank the Chairman for holding this hearing, along
+with the Ranking Member, and express my apologizes. This is
+organizational week, and, as the Ranking Member on
+Transportation Security, we were organizing our Subcommittee
+agenda for the 112th Congress.
+    But I do want to thank the panelists for being here and
+indicate to some of the Members who are on this Committee that
+two of these panelists are old friends. This is dj vu. This is
+same story, same place, and same results.
+    So I really would hope that this Committee would have the
+courage of convictions to really do something about immigration
+reform. Because, otherwise, Mr. Griswold, we could be here in
+2025, speaking the same song--singing the same song, and
+speaking it for those of us who can't sing.
+    So let me start with Mr. Kibble, to ask him--and I am
+sorry, Mr. Kibble. How long have you been in your position?
+    Mr. Kibble. In the position of deputy director?
+    Ms. Jackson Lee. Yes, sir.
+    Mr. Kibble. For about 2 months.
+    Ms. Jackson Lee. Two months, sir. That is okay. You know,
+this is a new Administration. And were you associated with ICE
+previously?
+    Mr. Kibble. Yes, I have been in ICE and the legacy Customs
+Service before that since 1994.
+    Ms. Jackson Lee. All right, sir. Would you consider your
+work a failure?
+    Mr. Kibble. No, not at all.
+    Ms. Jackson Lee. Well, why don't you explain that to me?
+Because it hasn't been personalized, but we have characterized
+ICE work as a failure. Do you consider that you have not been
+steadfastly conforming to the laws of which govern ICE
+enforcement, your internal enforcement work?
+    Mr. Kibble. I would just say, ma'am, that we--you know, in
+law enforcement in general, you deal with a world of finite
+resources. And, particularly in Federal law enforcement, we
+look to target the most effective piece or part of the
+enterprise. As we do in drug trafficking, we focus on the
+supplier.
+    Ms. Jackson Lee. To grab you the biggest pull, the biggest
+return.
+    Mr. Kibble. So, in this case, you know, in worksite
+enforcement, there is a relentless, a surgical, a laser-like
+focus on holding employers accountability and making sure they
+are on the right side of the law. Because, in the final
+analysis, they are the ones that are supplying the jobs.
+    So it is just--it is balancing--it is making the most
+impact, achieving the greatest good with the resources that are
+available.
+    Ms. Jackson Lee. I compliment you on that, because I will
+be the first to raise my hand and say that I was appalled at
+the raids. You did that a couple years ago. And there may be
+some more discreet ones. And some would argue that that was a
+big celebration. In my district, people were falling off
+ladders and pregnant women were being trampled. It was not
+effective.
+    What I understand you to say now is that you are
+meticulously going to the employer, holding their feet to the
+fire, and ensuring that they are complying. Is that my
+understanding?
+    Mr. Kibble. That is correct, ma'am. But an important
+component of that strategy, for that to work, to have that
+culture of compliance, we have to touch as many businesses as
+possible, large and small----
+    Ms. Jackson Lee. So you need more resources to answer the
+call of those who say the employer enforcement is a good thing.
+Is that what I hear you saying? Or you have already touched all
+the businesses you think you need to touch?
+    Mr. Kibble. No. No, no, no. We are constantly looking at
+ways, and particularly with aggressive I-9 audits, to get to
+that culture of compliance, to address as many of those
+businesses, so that we can get to that deterrence, that climate
+of accountability.
+    Ms. Jackson Lee. And do you see anything in the Obama
+administration, President Obama administration, that
+wouldcounter you enforcing the law and being effective in
+touching employers and letting them know how serious we are
+about focusing on the hiring of documented individuals? Do you
+see anything to the contrary?
+    Mr. Kibble. Ma'am, the key thing for us to do is to just
+take the resources that we have, and particularly as a career
+officer, to take the resources that are available, the policies
+and the laws as we find them, and make aggressive use of them.
+    Ms. Jackson Lee. But nobody has called you from the White
+House or from General Holder's office and said, ``Stop doing
+what you are doing''?
+    Mr. Kibble. No.
+    Ms. Jackson Lee. All right.
+    Mr. Griswold, where can we go, seriously, on this issue of
+immigration reform? Enforcement is good. I can't imagine that
+this Administration is--the Administration has the greatest
+number of undocumented coming through and it is an open door.
+It is not. But if we don't fix the comprehensive aspect of it,
+if we don't regularize individuals, are we going to be here in
+2025 like I said?
+    Mr. Griswold. I think we can make an appointment. If we
+just continue with enforcement only, I think we are going to be
+here for years and years, wrestling with the same problem.
+    I think Homeland Security Secretary Napolitano said it
+well; it needs to be a three-legged stool. You need to have
+smart enforcement. You need to have some way of legalizing
+those who are here. And you have to have a robust worker
+program so we can accommodate the future labor needs of our
+economy.
+    It is simple supply and demand. We have demand for these
+workers. The supply of Americans who have traditionally filled
+these jobs is shrinking. Immigrant workers have filled the gap.
+We don't allow them to come in legally in sufficient numbers.
+It is not that there are no Americans who will do these jobs;
+there is just not sufficient number in these industries.
+    So we need to change our law. Otherwise, we are going to be
+wasting billions of dollars, hundreds of people are going to be
+dying at the border each year. We need to change our law. And
+only Members of Congress can do that.
+    Ms. Jackson Lee. And I don't want the bad guys to rule.
+This kind of process allows bad guys to take over the borders
+of Texas, California, Arizona, because they are in charge. The
+human smugglers--they are all in charge.
+    This last point--and I thank the Chairman for his
+indulgence--this very last point. Did you propose--and I am
+sorry; as I said, I was in an earlier meeting--did you propose
+to take away American jobs? Are you intending to take away
+American jobs with how you are configuring, reforming the
+immigration system? You have to get on the record to say what
+you mean as it relates to American jobs and Americans not being
+able to have work.
+    Mr. Griswold. Yeah, quite the opposite. These low-skilled
+immigrants complement American workers. They allow middle-
+income Americans to work in these important industries. These
+low-skilled immigrants actually attract investment. They create
+job opportunities in upstream and downstream industries for
+middle-class Americans, it has been shown. If we were able to
+deport those 7 million or 8 million low-skilled workers in the
+workforce, it would be a disaster for the U.S. economy.
+    Ms. Jackson Lee. I thank the Chairman for his indulgence.
+    And, Mr. Griswold, I look forward to engaging you.
+    Mr. Cutler, thank you so very much. You are a longtime
+colleague.
+    And, Mr. Krikorian, we have been together before. We thank
+you.
+    And, Mr. Kibble, thank you so very much.
+    I yield back.
+    Mr. Gowdy. Yes, ma'am. I thank the gentlelady from Texas.
+    And I would like to thank all of the witnesses. The weather
+is inclement, the voting schedule is unpredictable, to say the
+least. And you have been very patient. And we have all
+benefitted from your expertise and your patience and
+collegiality with us.
+    Without objection, all Members will have 5 legislative days
+to submit to the Chair additional written questions for the
+witnesses, which we will forward and ask the witnesses to
+respond as promptly as they can so their answers may be made
+part of the record.
+    Without objection, all Members will have 5 legislative days
+to submit any additional materials for inclusion into the
+record.
+    With that, again, I would like to thank all the witnesses.
+    This hearing is adjourned.
+    [Whereupon, at 3:15 p.m., the Subcommittee was adjourned.]
+                            A P P E N D I X
+                              ----------
+               Material Submitted for the Hearing Record
+            Letter from Lynn Shotwell, Executive Director,
+           American Council on International Personnel (ACIP)
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                                 <all>
+</pre></body></html>

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+<html>
+<title> - E-VERIFY: PRESERVING JOBS FOR AMERICAN WORKERS</title>
+<body><pre>
+[House Hearing, 112 Congress]
+[From the U.S. Government Publishing Office]
+                       E-VERIFY: PRESERVING JOBS
+                          FOR AMERICAN WORKERS
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                            SUBCOMMITTEE ON
+                   IMMIGRATION POLICY AND ENFORCEMENT
+                                 OF THE
+                       COMMITTEE ON THE JUDICIARY
+                        HOUSE OF REPRESENTATIVES
+                      ONE HUNDRED TWELFTH CONGRESS
+                             FIRST SESSION
+                               __________
+                           FEBRUARY 10, 2011
+                               __________
+                            Serial No. 112-4
+                               __________
+         Printed for the use of the Committee on the Judiciary
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+      Available via the World Wide Web: http://judiciary.house.gov
+                  U.S. GOVERNMENT PRINTING OFFICE
+  64-405 PDF              WASHINGTON : 2011
+-----------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
+area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC
+20402-0001
+                       COMMITTEE ON THE JUDICIARY
+                      LAMAR SMITH, Texas, Chairman
+F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
+    Wisconsin                        HOWARD L. BERMAN, California
+HOWARD COBLE, North Carolina         JERROLD NADLER, New York
+ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT,
+BOB GOODLATTE, Virginia                  Virginia
+DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
+STEVE CHABOT, Ohio                   ZOE LOFGREN, California
+DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
+MIKE PENCE, Indiana                  MAXINE WATERS, California
+J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
+STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
+TRENT FRANKS, Arizona                  Georgia
+LOUIE GOHMERT, Texas                 PEDRO PIERLUISI, Puerto Rico
+JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
+TED POE, Texas                       JUDY CHU, California
+JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
+TOM REED, New York                   LINDA T. SANCHEZ, California
+TIM GRIFFIN, Arkansas                DEBBIE WASSERMAN SCHULTZ, Florida
+TOM MARINO, Pennsylvania
+TREY GOWDY, South Carolina
+DENNIS ROSS, Florida
+SANDY ADAMS, Florida
+BEN QUAYLE, Arizona
+      Sean McLaughlin, Majority Chief of Staff and General Counsel
+       Perry Apelbaum, Minority Staff Director and Chief Counsel
+                                 ------
+           Subcommittee on Immigration Policy and Enforcement
+                  ELTON GALLEGLY, California, Chairman
+                    STEVE KING, Iowa, Vice-Chairman
+DANIEL E. LUNGREN, California        ZOE LOFGREN, California
+LOUIE GOHMERT, Texas                 SHEILA JACKSON LEE, Texas
+TED POE, Texas                       MAXINE WATERS, California
+TREY GOWDY, South Carolina           PEDRO PIERLUISI, Puerto Rico
+DENNIS ROSS, Florida
+                     George Fishman, Chief Counsel
+                   David Shahoulian, Minority Counsel
+                            C O N T E N T S
+                              ----------
+                           FEBRUARY 10, 2011
+                                                                   Page
+                           OPENING STATEMENTS
+The Honorable Elton Gallegly, a Representative in Congress from
+  the State of California, and Chairman, Subcommittee on
+  Immigration Policy and Enforcement.............................     1
+The Honorable Zoe Lofgren, a Representative in Congress from the
+  State of California, and Ranking Member, Subcommittee on
+  Immigration Policy and Enforcement.............................     4
+The Honorable Lamar Smith, a Representative in Congress from the
+  State of Texas, and Chairman, Committee on the Judiciary.......    16
+The Honorable John Conyers, Jr., a Representative in Congress
+  from the State of Michigan, and Ranking Member, Committee on
+  the Judiciary..................................................    17
+                               WITNESSES
+Ms. Theresa C. Bertucci, Associate Director, Enterprise Services
+  Directorate, U.S. Citizenship and Immigration Services
+  Oral Testimony.................................................    23
+  Prepared Statement.............................................    25
+Mr. Richard M. Stana, Director, Homeland Security and Justice
+  Issues, U.S. Government Accountability Office
+  Oral Testimony.................................................    37
+  Prepared Statement.............................................    39
+          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
+Prepared Statement of the Honorable Elton Gallegly, a
+  Representative in Congress from the State of California, and
+  Chairman, Subcommittee on Immigration Policy and Enforcement...     3
+Prepared Statement of Tyler Moran, Policy Director, National
+  Immigration Law Center, submitted by the Honorable Zoe Lofgren,
+  a Representative in Congress from the State of California, and
+  Ranking Member, Subcommittee on Immigration Policy and
+  Enforcement....................................................     7
+Information of the AFL-CIO and Change to Win, submitted by the
+  Honorable John Conyers, Jr., a Representative in Congress from
+  the State of Michigan, and Ranking Member, Committee on the
+  Judiciary......................................................    18
+Prepared Statement of the Honorable John Conyers, Jr., a
+  Representative in Congress from the State of Michigan, and
+  Ranking Member, Committee on the Judiciary.....................    21
+Material submitted by submitted by the Honorable Zoe Lofgren, a
+  Representative in Congress from the State of California, and
+  Ranking Member, Subcommittee on Immigration Policy and
+  Enforcement....................................................    55
+Prepared Statement of Jessica St. Pierre, U.S. Citizen, submitted
+  by the Honorable Zoe Lofgren, a Representative in Congress from
+  the State of California, and Ranking Member, Subcommittee on
+  Immigration Policy and Enforcement.............................   140
+                                APPENDIX
+               Material Submitted for the Hearing Record
+Letter from Lynn Shotwell, Executive Director, the American
+  Council on International Personnel.............................   153
+Material submitted by the Migration Policy Institute (MPI).......   155
+                       E-VERIFY: PRESERVING JOBS
+                          FOR AMERICAN WORKERS
+                              ----------
+                      THURSDAY, FEBRUARY 10, 2011
+              House of Representatives,
+                    Subcommittee on Immigration
+                            Policy and Enforcement,
+                                Committee on the Judiciary,
+                                                    Washington, DC.
+    The Subcommittee met, pursuant to notice, at 10:05 a.m., in
+room 2141, Rayburn Office Building, the Honorable Elton
+Gallegly (Chairman of the Subcommittee) presiding.
+    Present: Representatives Gallegly, Smith, Gohmert, Poe,
+Ross, Lofgren, Conyers, and Pierluisi.
+    Staff present: (Majority) Andrea Loving, Counsel; Marian
+White, Staff Assistant; and Tom Jawetz, Minority Counsel.
+    Mr. Gallegly. Good morning. I call the Subcommittee to
+order.
+    I have an opening statement. Then I will defer to our
+colleagues and get our hearing going.
+    Most folks on this Committee know that I have long said
+that the way to solve the problem of illegal immigration is not
+all that complicated. First, we must enforce our laws, and
+second, we must discourage illegal immigration. And finally, we
+must remove the benefits that make it easy for illegals to stay
+in this country.
+    With nearly 14 million unemployed Americans, removing the
+magnets is more important now than ever.
+    The biggest magnet for illegal immigrants is jobs. So we
+owe it to the American people to do whatever we can to reduce
+the number of American jobs going to illegal immigrants. The E-
+Verify program helps to do just that. E-Verify allows employers
+to check the work eligibility of hew hires by running the
+employee's Social Security number or alien identification
+number against Department of Homeland Security and Social
+Security Administration records.
+    In 1995, I chaired a congressional task force on
+immigration reform. We published a 200-page report with more
+than 80 specific recommendations. One of those was for an
+electronic employment eligibility verification system which was
+included in Chairman Smith's 1996 immigration reform bill. That
+system is now known as E-Verify.
+    It is currently a voluntary program for most of the almost
+250,000 employers who use it. It is free, Internet-based, and
+very, very easy to use. And the employers who use it all agree.
+    In an October 2010 USCIS customer satisfaction survey, E-
+Verify received 82 out of 100 on the American Customer
+Satisfaction Index scale. The 82 scored by E-Verify is much
+higher than the Federal Government's satisfaction index of 69.
+    And 76 percent of the National Federation of Independent
+Business members said it would be a minimal or no burden if
+there was one telephone number or a single Internet web site
+where we could check a new employee's eligibility to work. And
+that is exactly what E-Verify is.
+    But I also want to acknowledge that there are two very
+important components that must exist to help ensure that U.S.
+jobs go to Americans and legal residents.
+    First, the Federal Government must put in place enough
+enforcement resources to ensure proper use of E-Verify.
+Employers must have to know if they misuse the system, for
+instance, by ignoring the fact that the photo in the E-Verify
+does not match the photo on the identity document provided by
+employee, they will be investigated and held accountable. Right
+now, there is nowhere near the level of enforcement needed for
+E-Verify or really, for that matter, anything having to do with
+illegal immigration.
+    Second, the SSA must work in conjunction with DHS to use
+Social Security no-match letters. If the same Social Security
+number is being queried by employers in several different
+States at around the same time, the likelihood of fraud is very
+high.
+    These steps will help E-Verify's continued success.
+    And I look forward to the testimony of our witnesses today.
+    And at this point, I would yield to my good friend from
+California, the Ranking Member, Ms. Lofgren.
+    [The prepared statement of Mr. Gallegly follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Ms. Lofgren. Thank you, Mr. Chairman.
+    Today's hearing on E-Verify continues the conversation we
+began at the Subcommittee's first hearing on ICE worksite
+enforcement. The situation we face is clear to everyone. Our
+immigration system is broken and it doesn't meet the needs of
+our country. As we discussed before, simply continuing to
+enforce our broken immigration laws is not a serious job
+proposal. Pressing harder on the gas without fixing the vehicle
+will only endanger our recovering economy, hurt American
+workers, and leave our immigration system as broken as when we
+started.
+    Being from Silicon Valley, I am a big advocate for
+technological solutions to problems, and I support a carefully
+designed electronic employment eligibility verification system
+that works and contains sufficient safeguards. In fact, since
+2005, every serious proposal to fix our broken immigration
+system has tackled the challenge of verifying the employment
+eligibility of our workforce.
+    But we need to take into account the complex realities of
+our economy. There are those who argue that making E-Verify
+mandatory for all employers will destroy the jobs magnet by
+preventing unauthorized workers from getting new jobs. They
+want employers to use E-Verify not only for new hires, but for
+existing employees as well. They believe this issue boils down
+to simple math, that every time we remove an undocumented
+worker from a job or from the country, we open that job for a
+native-born worker. But this simple math is just bad math. The
+truth is that mandating E-Verify alone would not destroy the
+jobs magnet. It would actually encourage businesses and workers
+to enter the underground economy by working off the books.
+    When the Congressional Budget Office analyzed the SAVE Act
+in 2008, it concluded that mandating E-Verify without reforming
+our broken immigration laws would suck $17.3 billion out of the
+tax system. Driving millions of workers further into the
+shadows would not only cost this country $17.3 billion in lost
+revenue, it would depress wages and working conditions for all
+workers, including United States workers, as unscrupulous
+employers would be better able to undercut those that play by
+the rules.
+    It gets worse. In some industries, like agriculture,
+mandating the use of E-Verify would actually reverse the
+polarity of the magnet, shipping millions of jobs overseas. In
+agriculture where 75 percent of the jobs are filled by
+undocumented immigrants, E-Verify would decimate the
+agricultural economy, and as we have learned over the years,
+the increase in wages necessary to get U.S. workers to go to
+the fields as migrant workers would hike production costs so
+high that U.S. food products would no longer be competitive
+with imported products. The end result would be the closure of
+America's farms, a less secure America, and the mass offshoring
+of millions and millions of U.S. jobs, including all the
+upstream and downstream jobs that are created and supported by
+our agriculture industry.
+    The jobs magnet that draws people to this country, a sign
+of economic prosperity and opportunity, would be reversed,
+repelling businesses and entrepreneurs from investing in our
+country and contributing to our economic recovery.
+    I am pleased to have these witnesses before us today
+because I expect that we will hear about ongoing efforts to
+improve the accuracy of E-Verify. I also expect, however, that
+we will hear about serious challenges that remain.
+    One issue of great concern during this period of economic
+recovery and high unemployment is the E-Verify error rate,
+which has directly led to tens of thousands of U.S. citizens
+and employed authorized noncitizens to improperly lose their
+jobs. Based on an analysis of USCIS data, the National
+Immigration Law Center estimates in their submitted testimony
+that mandating E-Verify for all employers would jeopardize the
+jobs of about 1.2 million American citizens and work-authorized
+nonimmigrants. I would ask unanimous consent, Mr. Chairman, to
+enter that statement into the record.
+    Mr. Gallegly. Without objection.
+    [The information referred to follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Ms. Lofgren. Today's hearing is E-Verify: Preserving Jobs
+for American Workers. But until the problems are fixed and
+until we fix our broken immigration system more generally, the
+statement is simply untrue.
+    Mr. Chairman, I thank you for recognizing me for my opening
+statement and yield back.
+    Mr. Gallegly. Thanks to the gentlelady.
+    At this time, I would yield to the Chairman of the full
+Committee, my good friend, Lamar Smith.
+    Mr. Smith. Thank you, Mr. Chairman.
+    With unemployment over 9 percent now for 21 months, jobs
+are scarce and families are worried. According to the Pew
+Hispanic Center, 7 million people are working in the U.S.
+illegally. These jobs should go to legal workers.
+    One effective program to help ensure jobs are reserved for
+citizens and legal workers is E-Verify. It is an electronic
+employment eligibility verification system run by U.S.
+Citizenship and Immigration Services in conjunction with the
+Social Security Administration. Through E-Verify, the Social
+Security numbers and alien identification numbers of new hires
+are checked against Social Security Administration and
+Department of Homeland Security databases in order to help
+employers determine who is eligible to work in the U.S.
+    I have used the program, frankly, repeatedly to ensure that
+all staff members in my office are eligible to work in the
+U.S., as all Members of Congress are required to do. It is
+free, quick, and easy to use.
+    I am aware of criticisms of E-Verify, some legitimate and
+most not. But the fact remains that E-Verify is a very
+effective tool for employers who want to hire legal workers.
+    Perhaps the most valid criticism of E-Verify is the
+identity theft loophole. Specifically, if an employee provides
+an employer with a stolen Social Security number and matching
+identification information, E-Verify will determine that the
+Social Security number is one that is work-eligible.
+    USCIS has taken steps to help close the ID theft loophole.
+For instance, they have instituted the photo-matching tool.
+This allows an employer to view a picture of the employee from
+a green card and employment authorization document or a
+passport to determine that the employee is in fact the person
+to whom the Social Security number or alien identification
+number was issued. I am interested in hearing what USCIS has to
+say today about further improvements for the identity theft
+loophole and expansion of the photo-match tool.
+    Also, it is critical that DHS and SSA work together to
+investigate any suspicious overuse of Social Security numbers
+through E-Verify.
+    One issue regarding the identity theft loophole that I hope
+Ms. Bertucci will address was noted by a 2009 Westat study on
+E-Verify. The study stated that 3.3 percent of all E-Verify
+queries are for unauthorized workers and just over half of
+those are actually found to be work-authorized. Now, this
+figure is often cited by opponents to the program. However, it
+is important that Westat says they estimated this percentage
+based on their assumptions of the number of illegal immigrants
+in the workforce. It was not based on the discovery of any
+illegal immigrant individuals actually in the workforce. So I
+would caution against using this number.
+    Studies by Westat and USCIS show that E-Verify's work
+eligibility confirmation rates continue to improve as the
+system is upgraded. Last year's USCIS data shows that 98.3
+percent of employees were confirmed as work-authorized within
+24 hours. And a 2009 Westat report found that those eligible to
+work are immediately confirmed 99.5 percent of the time.
+    Nearly 250,000 businesses now use E-Verify and over 1,300
+more sign up for it each week.
+    I supported the previous Administration's attempts to
+expand the number of employers using E-Verify, and they did so
+through outreach to businesses, but they also did so by
+mandating certain Federal contractors and others use E-Verify.
+    Today I hope to hear how the current Administration plans
+to expand those requirements. With 26 million Americans
+unemployed or underemployed, expanding E-Verify would help open
+up jobs that they need.
+    Thank you, Mr. Chairman, and I will yield back the balance
+of my time.
+    Mr. Gallegly. I would yield to the Ranking Member of the
+full Committee, my good friend, Mr. Conyers.
+    Mr. Conyers. Thank you, Chairman Gallegly. I wasn't at the
+first Subcommittee meeting hearing, and so I didn't have a
+chance to put in my congratulations to your Chairmanship.
+    We are here faced with a very curious problem. In a way it
+is simple, but then in a way there are some problems and
+complexities here.
+    Now, we meet in the midst of record deportations from the
+United States for the last 2 years. Those numbers have been
+going up. And there is no one that I know of that would argue
+that we should stop enforcing our immigration laws. But
+enforcement without reform will promote a race to the bottom
+that can only hurt the American worker in the end.
+    And that is why I ask unanimous consent to put in the labor
+movement framework for comprehensive immigration reform by two
+large unions, AFL-CIO and Change to Win. These two unions
+represent over 16 million workers, more than 60 unions, and
+have opposed an enforcement-only approach and have called for
+real solutions that can fix our broken immigration system.
+    [The information referred to follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Conyers. So I hope that the discussion this morning in
+Judiciary turns around the two twin methods that many are
+recommending. Enforcement, yes, but that we have got to also
+talk about the real solutions of reform. Enforcement and reform
+is what I am going to be looking for in our discussion this
+morning.
+    You see, more and more are beginning to recognize that an
+enforcement-only approach does not diminish the demand for
+willing workers. They could care less about enforcement. They
+all know they could be busted. And you know, as I travel across
+the country, Ranking Member Lofgren, every hotel I go in, there
+are people that if you wanted to bet whether they had legal
+status in this country or not, I would be willing to take that
+bet because I suspect not. And so we have a certain, sometimes,
+hypocrisy going on. Some of the very people that want tough
+enforcement are the ones that are benefitting from this
+workforce that is here knowing that if they get turned in or
+turned over to law enforcement or ICE, they are on the way out.
+    And so I just want us to think about what are we thinking
+about and what are we talking about when we raise the issue of
+reform because enforcement only will not diminish the demand
+for willing workers, but merely push the undocumented further
+into the shadows which then makes them more susceptible to
+abuse and exploitation which drives down wages and working
+conditions for other workers, citizen and noncitizen alike.
+That is why the unions want us to look more at the reform part
+of this immigration challenge.
+    That is one of the many dangers of an over-rush to E-Verify
+mandatory for all workers because without fixing our
+immigration system, the problem is going to still continue. We
+know the Congressional Budget Office estimates that E-Verify,
+without broader immigration reform, will suck $17.3 billion
+annually out of our Federal tax revenues because millions of
+workers are currently on the books and paying payroll taxes,
+and what will they do? They will simply go off the books and
+into the underground economy which empowers bad employers and
+endangers everyone else.
+    We take notice of the fact that immigrants often fill
+critical gaps in our own workforce. Can we be candid here this
+morning? There are too many jobs that Americans are unwilling
+to take. Period. They do not want the work. It is a lousy job
+and it doesn't pay on top of it. And there is where the market
+for illegal immigrant labor comes in.
+    In the 111th Congress, we found out at a hearing on
+agricultural workers that experts on all sides of the debate
+agreed that Americans are not returning to the fields to work.
+Who doesn't know that? Nobody wants that stoop labor out on
+farms under tough conditions.
+    We learned that the increase in wages needed to get our
+workers to perform seasonal agricultural work would put
+American farmers out of business. We can't afford them. And a
+story told by one of our Republicans' own witness demonstrated
+that economic harm that would be done if we followed their
+enforcement-only approach.
+    A grower who established a program to attract American
+workers to plant and harvest sweet potatoes had to close the
+program down because it just wouldn't be profitable. Imagine
+the damage we would cause if our entire agriculture industry,
+millions of jobs were offshored because it could no longer
+compete with international growers. That is a possibility if we
+make E-Verify mandatory for all employers, including those in
+the agriculture industry. It would be everybody. Who has got an
+answer for that? I hope that is raised in this discussion.
+    And I will put the rest of my statement in the record, Mr.
+Chairman, and thank you for your indulgence.
+    Mr. Gallegly. Without objection, the statement will be put
+into the record in its entirety.
+    [The information referred to follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Gallegly. I appreciate the gentleman's comments.
+    And I want to welcome our two very distinguished witnesses
+today. And for the record, our witnesses' written statements
+will be entered into the record in its entirety.
+    Our first witness, Theresa Bertucci, currently serves as
+the Associate Director of the Enterprise Services Directorate
+for the U.S. Citizenship and Immigration Services, known as
+USCIS. Welcome, Ms. Bertucci, and we will hear your testimony
+at this point.
+     TESTIMONY OF THERESA C. BERTUCCI, ASSOCIATE DIRECTOR,
+     ENTERPRISE SERVICES DIRECTORATE, U.S. CITIZENSHIP AND
+                      IMMIGRATION SERVICES
+    Ms. Bertucci. Thank you. Chairman Smith, Chairman Gallegly,
+Ranking Member Lofgren, and Members of the Subcommittee.
+    Mr. Gallegly. Ms. Bertucci, can we just hit that button
+please? Thank you.
+    Ms. Bertucci. It is on. I am sorry. Can you hear me now?
+Okay. Sorry.
+    Chairman Smith, Chairman Gallegly, Ranking Member Lofgren,
+and Members of the Subcommittee, I am grateful for the
+opportunity to discuss our shared goal of effective employment
+eligibility verification through the E-Verify program.
+    I am pleased to report that the E-Verify program continues
+to grow at a steady pace. As of today, more than 246,000
+employers are enrolled, representing more than 850,000
+worksites, or 11 percent of employers. This 11 percent figure
+compares the 850,000 worksites to the 7.7 million business
+establishments from the U.S. Economic Census in 2007. More than
+1,300 new employers enroll each week. During fiscal year 2010,
+16.4 million queries were run with more than 5.3 million new
+queries this fiscal year.
+    E-Verify's accuracy rate is improving. Overall data
+mismatches have been reduced by 5.4 percent since 2007 due to
+enhancements to the system.
+    We appreciate the work undertaken by GAO in addressing the
+success of the program and the challenges confronting E-Verify.
+We are actively working to implement its important
+recommendations to improve the system.
+    Strengthening the integrity of the system is one of our
+primary goals. While E-Verify alone cannot detect all instances
+of identity fraud, we are working to improve the ability to
+detect fraud and significant steps have been taken. E-Verify
+expanded photographic verification to include U.S. passports
+and passport cards, employment authorization documents, and
+permanent resident cards. Of the 400,000 matches of DHS photo
+documents, the system has detected 4,000 mismatches.
+    Since June 2010, E-Verify has used a commercial database to
+validate the legitimacy of employers using the system.
+    The program has also increased monitoring and compliance of
+employer transactions. In fiscal year 2010, we issued 16,125
+compliance actions with over 9,600 actions to date this fiscal
+year.
+    USCIS also remains dedicated to protecting employees'
+rights. E-Verify implemented an employee hotline that offers
+information and assistance on the program, and callers can also
+use the hotline to lodge complaints about possible misuse or
+discrimination. The hotline handled over 15,000 calls last
+year.
+    USCIS and DHS Civil Rights/Civil Liberties have produced
+educational training videos that provide information to
+employees and employers about their rights and their
+responsibilities.
+    In the spring of 2011, we plan to pilot the E-Verify Self
+Check feature. Self Check will be a free web-based service that
+allows workers to verify their Government records before they
+are hired, which serves to both empower employees with
+information and to help further reduce data mismatches. Self
+Check will have identity assurance protections built into the
+system.
+    USCIS is dedicated to and fully engaged in the improvement
+of E-Verify so its use can increase. To achieve that goal on an
+ever-broadening scale, additional challenges remain. For
+example, the E-Verify system is predicated on an employer's
+Internet access. The ability of some sectors of the market to
+access the system will need to be addressed. As use increases,
+Federal agencies involved in the program will need to expand
+their capacity to administer the daily results of the query
+process, including the process of providing assistance to
+employees who assert system error.
+    The increased use of E-Verify will also require USCIS to
+improve its information technology infrastructure and
+analytical tools allowing for increased monitoring and
+compliance. The program has made great strides in becoming a
+fast, easy-to-use, and more accurate tool that helps employers
+maintain a legal workforce and comply with our Nation's
+immigration laws.
+    We are poised to meet the challenge that accompanies the
+growth of E-Verify and the needs of our customers, both
+businesses and employees. On behalf of USCIS Director Alejandro
+Mayorkas and all of our colleagues at USCIS, we appreciate the
+Congress' continued strong support of the program.
+    Thank you for the opportunity to testify before the
+Subcommittee. I look forward to your questions.
+    [The prepared statement of Ms. Bertucci follows:]
+               Prepared Statement of Theresa C. Bertucci
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Gallegly. Thank you very much, Ms. Bertucci.
+    Our second witness is Richard Stana. Mr. Stana serves as
+Director of Homeland Security and Justice Issues at the GAO and
+has dedicated 35 years of service to the GAO and has served at
+headquarters, field, and overseas services and directed reviews
+on a wide variety of complex and military--both military and
+domestic. Mr. Stana, welcome.
+TESTIMONY OF RICHARD M. STANA, DIRECTOR, HOMELAND SECURITY AND
+     JUSTICE ISSUES, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
+    Mr. Stana. Thank you, Chairman Gallegly and Ms. Lofgren,
+for inviting me to testify at this important hearing.
+    As you know, immigration experts say that the single most
+important step that could be taken to manage lawful immigration
+and reduce illegal immigration is to develop an effective
+worksite enforcement and authorization system.
+    E-Verify does provide employers with a tool to help
+identify those who are authorized to work.
+    Our recent report found that SSA and USCIS have taken some
+important steps and have improved the program, and yet,
+significant challenges remain. In my statement this morning, I
+would like to just highlight three of those issues. And I know
+that you have my prepared statement and you probably have a
+copy of our full report. So let me go right into the three
+areas.
+    First, let's talk about the TNC's. USCIS has substantially
+reduced the number of TNC's. Just a few years ago, the TNC
+level, the tentative nonconfirmation level, stood at about 8
+percent, and many of those turned out to be U.S. citizens who
+were improperly identified as not being work-authorized. That
+figure has gone down to about 2.6 percent and most recently
+below 2 percent, although that might be an anomaly. We will
+wait and see. That was just 1 month's worth of data.
+    USCIS did this by expanding the number of databases it
+queries and trying to refine the data through common error
+searches before they issue a TNC, and that has greatly reduced
+the number of TNC's.
+    Now, having said that, TNC's continue to occur for a number
+of reasons and mainly because the information in the data sets
+at USCIS, DHS, and SSA have not consistently recorded an
+individual's name. You might come to the United States with
+several surnames or be in the United States with several
+surnames, a hyphenated name, or a long name that was somehow
+shortened or anglicized. And when you enter data or have data
+entered into different data sets, the name may be recorded
+differently and thus create a mismatch and a TNC. There is no
+law that compels an individual to record information
+consistently among several data sets, and this is an issue.
+    So improving Government data sets, improving the
+information that employees have to help refine the data that
+they submit, and correcting inaccuracies or inconsistencies in
+agency data sets is really important to increasing the accuracy
+of E-Verify determinations. In the short run, it might increase
+the burden of the agencies, particularly at SSA, but in the
+long run, it will not only help with the system, but with
+respect to SSA, when it comes time to retire and collect your
+earnings, your system name and earnings records will be ready
+to go.
+    The second issue I want to talk about is identity theft and
+employer misuse. Despite improvements to reduce document fraud,
+E-Verify still cannot detect the use of eligibility documents
+that are either someone else's who is work-authorized or
+somehow the employer may provide a document to the worker to
+use that is not their own. The exact magnitude of the problem
+is unknown, but Westat estimated that about 3.4 percent of the
+confirmations that were issued a few years ago were actually to
+people who were not work-authorized, but they either used phony
+documents themselves or were complicit with the employers in
+gaining work authorization.
+    USCIS has a photo-matching tool that Ms. Bertucci
+mentioned. It can currently query for three documents that have
+photos. But a person can seek and gain work authorization by
+using any number of 26 documents. So while that has helped, it
+is not a panacea.
+    Also, with respect to the photo-matching tool, there have
+been instances--and we learned about this during our field work
+in Arizona--where employers have coached workers not to use
+documents that are part of the photo-matching tool and thus
+evading that important check. Biometrics might help, but we all
+know biometrics can be costly to both the Government and to
+employers, and there are privacy concerns about how much
+information the Government ought to have in its files that will
+need to be resolved.
+    Turning to employer misuse, some employers have limited
+pay, restricted work assignments, or even terminated employees
+who received a TNC, and this is wrong. The magnitude is not
+known. It exists. USCIS cannot determine these things from its
+data sets, but it needs to be more vigilant. I think USCIS only
+scans about 2 percent of employers in its nets to try to figure
+out how much of this abuse is going on. It does not do a 100
+percent check. It may be able to do more when this new data
+system comes up.
+    My final issue involves resources, and it is a subject that
+we have all talked about before at one time or another. An
+effective employment authorization system requires resources to
+ensure compliance with the system. That is true for E-Verify.
+It is true for the I-9 system. The resources are not there to
+do an effective job. USCIS must rely on ICE to investigate,
+sanction, and seek prosecution, but given ICE's existing
+priorities and resource constraints, it is limited in its
+ability to do so. The same limitations would exist if E-Verify
+were to be made mandatory.
+    Regarding the onsite checks of employer compliance with E-
+Verify rules, the so-called misuse or discrimination issue, to
+our knowledge, USCIS staff has made one site visit as of last
+August to one employer to check on those issues.
+    So policy decisions are going to have to be made about how
+to effect a credible worksite authorization and enforcement
+program using E-Verify to include the resources that are needed
+to make it successful, and these policy decisions have yet to
+be made.
+    Thank you very much.
+    [The statement Mr. Stana follows:]
+                 Prepared Statement of Richard M. Stana
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Gallegly. Thank you very much, Mr. Stana.
+    At this point before we go to questions, I would like to
+take just a brief break and give the Deputy Chief of the
+Verification Division at USCIS an opportunity to provide us
+with a visual demonstration of how E-Verify works. Kathy
+Lotspeich is our Deputy Chief. Kathy, are you ready?
+    Ms. Lotspeich. I am ready.
+    So I am just going to run really quickly for you here two
+cases: one that goes through automatically and one that is
+issued a tentative nonconfirmation.
+    So here I am on our home page. I am going to click on ``new
+case.'' What the employer does is they enter information from
+the form I-9. So here on the form I-9, the example I am going
+to use is someone who attested to be a citizen of the United
+States.
+    And I click ``continue.'' And then it asks me which
+documents the individual presented, and that will help me then
+determine what I need to enter into the system. For the demo
+today, I am going to hit ``list B and C documents,'' which are
+typically a driver's license and a Social Security card. Then I
+just enter a few data points from the form I-9. I actually do
+not need to put in their address or anything that is actually
+on the form I-9. I can just add, for this case, the name, date
+of birth. We have the citizenship status and the Social
+Security number. And then I go down and I enter the hire dates.
+And so for the hire date, I am going to enter today's date
+which is February 10, 2011.
+    I click ``continue.'' And then here it comes up as
+employment authorized. And so what the employer does at this
+point is they can take this case verification number and put it
+on the form I-9 or they could also print out some of the case
+details. I am going to select ``yes, the person continues to
+work.'' And they could attach that to their form I-9.
+    And note here when the employer closes a case, they could
+also select that the case is invalid. So if there was some type
+of a mistake made--this isn't a zero sum game--the employer can
+start the process over again.
+    I am going to go ahead and close this out.
+    And up here I could also print this out and attach it to
+the form I-9.
+    So now I am going to go ahead and just really quickly show
+for you another case where the individual gets a tentative
+nonconfirmation.
+    So I select ``new case.'' And again, I am going to attest
+as a citizen of the United States. ``List B and C documents''
+and again just enter the information and then, as before, enter
+today's date.
+    So now it is asking me to double check the information
+below. The system knows it is about ready to issue a tentative
+nonconfirmation but does want to give the employer a second
+chance at correcting any errors.
+    I am going to go ahead and select ``continue.'' And now the
+system is telling me that I have a tentative nonconfirmation
+with the Social Security Administration. It tells me that the
+information does not match, and it stresses that this does not
+mean that the employee is not authorized to work in the United
+States. However, there is some additional action required.
+    And at this point, the employer can give the employee a
+letter, which we have in Spanish and in English, giving a lot
+of the information about the employee, why the number did not
+match, what the employer needs to do, instructions for the
+employee why they received this notice, the opportunity to
+contest or not contest, and then information about their
+rights, and also a number they can call us at E-Verify or the
+Office of Special Counsel.
+    And then I will conclude our demonstration at this point.
+So basically the employee then takes this letter to the Social
+Security Administration or may call us at the Department of
+Homeland Security to resolve their case.
+    Thank you.
+    Mr. Gallegly. Thank you very much, Ms. Lotspeich.
+    At this point, I would like to ask Ms. Bertucci a couple
+questions. In your written testimony, you discuss the
+Monitoring and Compliance Branch which detects potential misuse
+with E-Verify by employers. I know you have issued 7,461,
+according to your statement, compliance letters, but what is
+the outcome of the issuance of these letters? And how many have
+been ignored? And what are the consequences of ignoring a
+compliance letter?
+    Ms. Bertucci. Thank you, sir.
+    The difference in letters issued between what I said in my
+oral testimony of 9,600 was updated today from the time we
+submitted my written statement. So that is the difference.
+First of all, I want to point that out. And that is this
+present fiscal year. Last year, the number was 16,121.
+    We really stood up the compliance group at full swing
+really, I would say, during 2010. We are about to hire even
+additional people out in our Nebraska office. So we are
+building up that compliance component.
+    We send out those letters as the first--we monitor various
+behaviors by employers--to include not using the system,
+signing up and not using the system. That is one thing we will
+monitor. We will monitor multiple uses of SSN's to determine
+prior to the fixes to the system that Kathy just demonstrated
+to ensure that it wasn't errors in--typos, frankly, or errors
+in entering the data. Those are some of the enhancements we did
+to the system related to that. But more importantly, in case it
+is something else going on, we will monitor those kinds of
+behaviors. And there are a number of other behaviors that we
+will monitor to include an employer running the system against
+a current employee, which is not allowed. It has to be upon
+hire and/or not responding to a high number of TNC's possibly
+that we are not seeing closed out. What is going on at that
+employee worksite?
+    So really in the end what we are doing is we are either
+calling them--so let me be clear that we are either calling
+them in that 16,000 or 9,600 number or we are sending them a
+written letter. We are then doing the active reach-back to
+those employers to see whether it is an education issue or
+anything else. We have not yet done it, and the end result
+would be we would terminate their MOU with us on monitoring and
+compliance. However, if we saw egregious conduct by the
+employer in any way, shape, or form that we believe is
+inappropiate, according to our MOU's with ICE and/or DOJ's
+Office of Special Counsel that has jurisdiction over possible
+discrimination, we work with those offices as well.
+    So that is the kind of compliance we are doing today, and
+our ability--I think Mr. Stana talked to it--is that one of the
+things we really are trying to do is stand up a better
+analytical tool to be able to do better monitoring and
+compliance. Right now, frankly, it is a little clumsy on the
+basic technology infrastructure that we have today. So we are
+working to improve that tool hopefully by later this year. We
+are going to have a pilot running to do even more analysis of
+the data.
+    Mr. Gallegly. Have there been any employers prosecuted as a
+result of misuse?
+    Ms. Bertucci. First of all, we have not really referred
+anything yet to ICE. Under the MOU, we can. So ICE is out doing
+their jurisdictional responsibilities, and sometimes, frankly,
+we will come across or they may come across an employer who
+also uses the system. So the worksite enforcement and
+prosecution are on the ICE side of the house.
+    Mr. Gallegly. But we have over 9,000 of these letters that
+you have mentioned.
+    Ms. Bertucci. Yes.
+    Mr. Gallegly. And out of the 9,000-plus, there really
+hasn't been any consequence at all, has there?
+    Ms. Bertucci. The system is a voluntary system. To a great
+extent, we believe the majority of the employers that are using
+the system are trying to comply with the law and the
+requirements of our system. So what we are doing is the
+outreach to ensure is there a training issue, is there a data
+issue, is it those kinds of things? We do not have enforcement
+authority within USCIS certainly on a prosecution standpoint.
+But if there are egregious behaviors that we believe are worthy
+of referral, then we would refer those to ICE within their own
+set of priorities for follow-up and possible review.
+    Mr. Gallegly. Obviously, if the program was not voluntary
+and it was mandatory, the situation and the incentive on the
+part of the employer would be greatly different. In fact, this
+program was originally introduced as a mandatory. It was passed
+out of this Committee and the bill, mandatory. And then when it
+came back in conference, that is when it got downgraded to
+something less than what would be effective in my opinion.
+    My time has expired. I would yield to the gentlelady from
+California, Ranking Member, Ms. Lofgren.
+    Ms. Lofgren. Thank you, Mr. Chairman.
+    Before my questions, I would like to take care of a few
+housekeeping items.
+    First, Congresswoman Sheila Jackson Lee called to let me
+know that she is Ranking Member on a Subcommittee over at
+Homeland Security and hopes to get here if that hearing
+concludes and offers her apologies for the unavoidable absence.
+    I would also like to ask unanimous consent, Mr. Chairman,
+to submit statements from the Agricultural Coalition for
+Immigration Reform, the American Council on International
+Personnel, the Main Street Alliance for the National Leadership
+Council, statements from the faith community, including the
+Catholic Bishops Committee, the American Jewish Committee,
+Church World Service, Sisters of Mercy, the Unitarian
+Universalist Association of Congregations, the Friends
+Services, the Episcopal Diocese of California, the St. Norbert
+Abbey, the Evangelical Lutheran Church of America, Catholic
+Charities of Yakima, Washington, the Jesuits California
+Province, the Coalition of Episcopal Latinos, as well as
+statements from Illinois State representatives, Texas State
+representatives, Cook County commissioners, an additional Texas
+State representative, the National Immigration Law Center, the
+National Immigration Forum, the American Civil Liberties Union,
+the Asian American Center for Advancing Justice, the American
+Immigration Lawyers Association, the Anti-Defamation League,
+CAUSA Oregon, Coalition for Human Immigrant Rights of Los
+Angeles, the Colorado Immigrant Rights Coalition, Farmworkers
+Justice, the Hispanic Association of Colleges & Universities,
+LULAC of Syracuse, the Muslim American Society Immigrant
+Justice Center, One America, Racine Dominicane, and the Wayne
+Action for Racial Equality.
+    Mr. Gallegly. Without objection, they will be made a part
+of the record of the hearing.
+    [The information referred to follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Gallegly. And with that, I would yield to the
+gentlelady for her questions.
+    Ms. Lofgren. Thank you very much, Mr. Chairman.
+    I have many questions. And first, let me just say that I
+think it is helpful to have this hearing, but there are a
+variety of studies, analyses available to us. And one that has
+just been released within the last few weeks is an analysis by
+Bloomberg Government, and this is the conclusion that the
+Bloomberg analysis made. Although E-Verify is free to the
+employer, it does cost employers to become ready to use the
+system. And one of the estimates from Bloomberg is that most of
+the burden would go to small businesses. In fact, they estimate
+that if the E-Verify had been mandatory for all employers last
+year, it would have cost businesses $2.7 billion on their end
+and that most of that cost would be for small businesses. In
+fact, Bloomberg estimates $2.6 billion that would be borne by
+small businesses for a variety of reasons. They may not have an
+Internet connection. They would have to get one, training
+employees, and the like.
+    Has USCIS involved the small business community in the
+analysis of what you are doing, and what have they told you?
+    Ms. Bertucci. n today's environment 73 percent of our
+companies or our employers are employers of under 100 people.
+So I realize there are various definitions of small businesses,
+and certainly a small shop is--so 73 percent of our members or
+our participants are small business. We have actively engaged
+in outreach. We understand the concerns. We believe we
+understand the concerns of small business. We are working very
+closely with the Small Business Association to do a lot of
+outreach with that community. But so far, I would not say we
+have done that kind of analysis.
+    Ms. Lofgren. Okay.
+    Turning to Mr. Stana--and thank you for your years of
+service at GAO, one of our favorite orgs because you call it as
+you see it whether we like it or not.
+    We have heard that the E-Verify error rate is going down,
+and that is good. However, if there are wrong decisions made
+through whatever error, it has real consequences for people.
+And looking to your December 2010 report, I mean, you indicated
+that American citizens could lose jobs over misspellings and
+the like. We had an occasion to meet a young woman, Jessica St.
+Pierre, who was a former telecommunications worker in south
+Florida, born and raised in the United States. She lost a good-
+paying job because of an E-Verify error, and she tried for
+months to discover the error, to fix the problem, and she was
+unemployed, I mean, that whole time. The problem still hasn't
+been resolved and she had to accept a lower-paying job because
+of this mistake.
+    I would ask unanimous consent to enter her statement into
+the record.
+    [The information referred to follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Ms. Lofgren. But I would note that your report in December
+indicates that Privacy Act requests take an average of 104 days
+for a response to determine inaccuracies. Can you talk about
+the challenges that workers like Jessica face and what
+procedures are in place when an American citizen loses her job,
+is fired because of a mistake?
+    Mr. Stana. Yes. That is sort of a story behind the numbers,
+if you will. If you look at the gross statistics, 98 percent
+are work-authorized. There is no problem. Of the ones who are
+not work-authorized, another maybe .3 percent, say a third of a
+percent, eventually are work-authorized through their queries.
+But there are some. Either the employer doesn't tell them that
+they have a TNC, or they have a TNC and somehow they can't get
+it resolved in 10 days or they can't get to an office in 10
+days, and they receive a final notification through the system
+and they don't get a chance to. Oftentimes an employee does not
+know where the source of the discrepancy is, whether it is in
+the SSA data set or if it is in a DHS database. That is where
+the 104 days comes in.
+    I also would note that when a final nonconfirmation comes
+in, there is no right of appeal, and that is what may have
+happened in that particular instance.
+    So there are issues that would have to be worked out if
+this were to be made mandatory or somehow had broader
+application. That doesn't mean that the system doesn't work for
+most people. It is just trying to make sure that these kinds of
+cases can be resolved to a satisfactory outcome.
+    Ms. Lofgren. Well, if you think about--just extrapolating,
+if we were to make this mandatory across the entire American
+workforce, let's say we are successful in getting it down to 1
+percent. We are not there yet. That is a million Americans that
+could be fired or not get a job because of an error rate.
+    Mr. Stana. And that is why, we recommended--and as Ms.
+Bertucci said, they accepted that recommendation--that USCIS
+find a way to make it easier to find the source of the error so
+that you identify those who are work-authorized, whether they
+are legal permanent residents with an EAD or they are U.S.
+citizens, to make sure that they can get a fair shake out of
+the system and that the system does what it is designed to do,
+check on work authorizations.
+    Ms. Lofgren. I see my time has expired. Mr. Chairman, thank
+you for yielding to me.
+    Mr. Gallegly. I thank the gentlelady for being conscious of
+the light. She used to do that to me. [Laughter.]
+    At this time, I would yield to my friend from Texas, Louie
+Gohmert, for 5 minutes.
+    Mr. Gohmert. Thank you, Mr. Chairman.
+    You know, one of the things that really has helped has
+been, as employers have signed on to use E-Verify--and
+obviously, you have talked about some of the strengths and
+weaknesses. But there seems to be a continuing lack of
+knowledge in the public sector about E-Verify, and it seems
+like awareness and outreach seem to be the Obama
+administration's approach to getting people to sign on. And I
+have concerns about that.
+    What plans specifically does this Administration have for
+pushing people to utilize E-Verify so that we can have people
+legally here in jobs that should be used by Americans without
+regard to race, creed, color, or national origin, any of that,
+but just that they are legally here? Hopefully there is more
+than just hoping people notice it on the news and decide, oh,
+that sounds like a good thing.
+    Ms. Bertucci. Sir, at this time, we are using outreach to
+get to E-Verify.
+    Mr. Gohmert. And it is a lovely word, but what does that
+mean? ``Outreach''? Somebody stuck out their arm over at the--
+--
+    Ms. Bertucci. No. No, sir. We have had 400 different events
+that we--we do webinars. We reach out to the HR communities,
+the large associations, national conferences. With the Small
+Business Administration, we are going throughout the country in
+different regions. We have done a number of things in the State
+of Florida, for instance. But we are reaching out to the larger
+conglomerates or groups or organizations that represent various
+sectors to include even the agriculture sector of the economy.
+So we are doing that kind of outreach.
+    Having said that, we agree with you. We did have an
+evaluation, an independent evaluation, of the nonuse of the
+system trying to figure out what we could do better. And most
+of those people said they are not using it. It was 500
+participants in that survey. Most of them did say they are not
+using it because they were never even aware of it. So we have
+invested in a marketing campaign to try to get certain segments
+of the economy in high population areas and so on. But that is
+the kind of outreach we are doing. We are, in fact, out there
+on the road and offering it in that way.
+    Mr. Gohmert. And that sounds nice. And I know if you have
+got 400 of these seminars, webinars planned, that will be
+helpful, but from my perspective in the last 2 years, I have
+noticed that if it is things that are really important to this
+Administration, whether it is Obamacare, whether it is cap and
+trade, whatever it is, there seems to be a whole lot of other
+things this Administration does, whether it is carrots or
+sticks, some might say the Chicago way of approaching getting
+more people on board.
+    And I am just wondering if this is really that--I get the
+impression from your written testimony--I was here late, but
+from your written testimony, you see that is as a very
+effective tool. I do too. But it just seems like if the
+Administration itself were really on board, there would be some
+carrots and sticks to drive employers to this so that we have
+people legally here that are actually in those jobs in this
+time of high unemployment and it takes care of a lot of other
+problems we have from people illegally here taking jobs away
+from Americans, people that are supposed to be here.
+    Has there been any discussion with the White House about an
+approach that would provide real carrot and sticks instead of
+just the awareness program?
+    Ms. Bertucci. Not at this program level. The Secretary has
+said that she is absolutely supportive of this program and
+wants to build a culture of compliance with employers.
+    Mr. Gohmert. But you understand.
+    Ms. Bertucci. I understand.
+    Mr. Gohmert. I mean, I have been here 6 years and I have
+picked up on--unlike when I was on the bench, people said what
+they meant, a lot of times when people say, yes, we are having
+meetings about it, it means this is going nowhere. And so I
+would encourage you, as my time is running out, please push and
+insist for more than just awareness campaigns. I mean, the Bush
+campaign had awareness campaigns. The President was very vocal
+in supporting it. But still, we got too many employers that
+have never heard of it and are not driven to go there.
+    But I thank you for your time.
+    Ms. Bertucci. Thank you, sir.
+    Mr. Gohmert. I yield back.
+    Mr. Gallegly. The gentleman, the full Committee Ranking
+Member, Mr. Conyers?
+    Mr. Conyers. Thank you, Mr. Chairman.
+    I want to commend Ms. Bertucci for her candor in conceding
+that this is still in the developmental stage and that there
+are things we have got to fix.
+    And I wanted to commend Mr. Stana for talking about
+employer complicity in the immigrant labor getting around
+hiding the fact that they are immigrant labor. And I thank you
+for that part of our discussion.
+    With Judge Gohmert, I agree with you. I think that the
+Administration may not be as fully behind this as their press
+releases might say.
+    Mr. Gohmert. Would the gentleman yield momentarily? And I
+am not meaning to pick on this Administration because it is
+following up E-Verify from the last one, and I would
+acknowledge that as well.
+    Mr. Conyers. But let's face it. Out of the first hearing on
+this subject and even this one, would it be unfair for
+impartial witnesses to come to the conclusion that a number of
+us here on the Committee have that E-Verify just isn't right
+now ready for prime time? I mean, how on earth can we talk
+about the Administration making this mandatory on every
+employer in the United States of America and we haven't any
+evidence of how it is really working? That is what you have
+told us here, Ms. Bertucci, this morning.
+    Why don't we slow down a bit and get some actual working
+evidence or get some more rigorous proof that this is working?
+    I liked the slide show this morning. I couldn't see
+anything because I don't have my glasses on. But I guess it was
+very impressive. People were nodding and so forth.
+    But look, with all the things we have to do, what is the
+big rush? Now, between both you experts, nobody has talked
+about the reform that is necessary in addition to the
+enforcement. You keep talking enforcement, enforcement,
+enforcement.
+    Have you ever heard of the labor movement's comprehensive
+immigration reform package that they put out in April 2009? Can
+I send it down for you to take a look at it?
+    Ms. Bertucci. Sure.
+    Mr. Conyers. Okay. Take it down.
+    And if you say you haven't, I won't be surprised and I
+won't hold it against you.
+    Neither of you mentioned anything about the reform part
+that I have been harping on all morning here. Don't you see
+that just enforcement alone, even if it were flawless--let's
+assume E-Verify worked. It still wouldn't change anything. So
+what is so complex about that? What do you have say about that,
+Stana?
+    Mr. Stana. Well, I would say this. The subject of our
+report was the E-Verify system, what is working, what is not.
+And I guess our answer would be there is some good news and
+there is some not-so-good news. This is a tool that employers
+can use, obviously, to determine whether the employer or the
+employee and they themselves, by extension, are in compliance
+with immigration law.
+    Now, the extent that you make that mandatory for all
+employees, or for certain sectors of the economy or a certain
+business size, that is a public policy decision. That is not
+really our decision to make. What we are trying to do, I think,
+is to give you some information and analysis that will help you
+make that decision.
+    Mr. Conyers. And we are grateful for that, and I am glad
+that you didn't come here this morning to tell us that we ought
+to make it mandatory. I am glad to hear it.
+    Now, Chairman Gallegly himself, because of what happened
+with the other body, isn't that thrilled with--I mean, they
+didn't fix it in the right way. We have still got our work cut
+out for him, and I appreciate him pointing that out as well.
+    Well, my time is up. Thanks a lot.
+    Mr. Gallegly. I thank the gentleman.
+    Mr. Ross?
+    Mr. Ross. Thank you, Mr. Chairman.
+    Ms. Bertucci, I am from Polk County, Florida which, growing
+up there, was known as the citrus capital of the world, and
+being very cognizant of that, I understand the labor needs that
+we have there. In fact, we have to rely significantly on
+immigrant labor. But we also find with some of our growers and
+our harvesters and other producers in that industry that
+Government programs like the H2A program with an adverse wage
+rate is a disincentive to hire through an H2A program or any
+other Government program.
+    And now, as we look at the E-Verify program--and you
+mentioned earlier that you had made some strides, I guess, in
+the State of Florida with E-Verify. Could you just tell me what
+you meant by that?
+    Ms. Bertucci. I was responding to outreach. We have gone
+into various States to outreach to those communities. That is
+what I was talking about.
+    Mr. Ross. Have you seen an expansion of the use of E-Verify
+in the State of Florida?
+    Ms. Bertucci. Yes.
+    Mr. Ross. Significantly?
+    Ms. Bertucci. I cannot--yes, we have but I don't know as
+significant as compared to other States.
+    Mr. Ross. I am a strong proponent of E-Verify, and I think
+it is something that we ought to enhance, expand, and use more
+efficiently. But again, when I look back at my growers and my
+harvesters, I ask the question, what incentive--and I think
+this is what Judge Gohmert was talking about--what incentive is
+there for an employer? Is there a safe harbor that when they
+knowingly--or unknowingly hire somebody who is not appropriate,
+is there a safe harbor to prevent him from immunity?
+    Ms. Bertucci. Well, without getting into the criminal
+prosecution area because I am not a lawyer and I am not on the
+ICE side of the house, having said that, I believe as the
+statute is written, it allows some recognition of the fact that
+the employer is trying to do the right thing by participating
+in the program. You know, obviously, if there is a really bad
+actor or an egregious employer that for some reason is breaking
+the law, I would assume that a prosecution and/or investigator
+would look at that.
+    Having said that, the presumption is the employer is trying
+to do the right thing by participating in this program, and
+that is always our assumption going in on the voluntary
+program.
+    Mr. Ross. And I think anything that we can do to
+incentivize their participation is going to be good.
+    Ms. Bertucci. Yes, and it's a tool. It is a tool for them
+to help comply with the law.
+    Mr. Ross. Exactly.
+    Now, Mr. Stana, you commented in your report page 6 that
+there are limited resources being put toward enforcement of
+employer compliance. What additional resources would you say
+that DHS may need in order to accomplish the adequate
+enforcement?
+    Mr. Stana. You know, I don't have a figure for you. I know
+this has been a longstanding problem with the old I-9 process
+as well. I think prior immigration reform legislation put the
+increases to ICE in the thousands, not in the tens or hundreds.
+    I would like to make one comment on what Ms. Bertucci said
+about not being a safe harbor because I think it is an
+important point.
+    Mr. Ross. Yes, sir.
+    Mr. Stana. Employers should not read participation in E-
+Verify as inoculating themselves.
+    Mr. Ross. Right.
+    Mr. Stana. What E-Verify does is it creates a record that
+they submitted a name and they got a response. They had to look
+at a photo, through the matching tool and they said that the
+person was who was in front of them. So it creates a record. If
+there is any worksite action, you know, they may get some
+accommodation because they are a voluntary participant, but
+they are by no means inoculated if the record shows that this
+person had a good idea, by virtue of the information that E-
+Verify provided, that the person before them was work-
+authorized or not. And that gets to the point that I raised
+with Ranking Member Conyers that all too often employers have
+been found to be complicit in these things.
+    We went to Colorado, North Carolina, and Arizona and talked
+with workers and with business owners on their experience with
+this, and we heard the same thing, that it is a tool, it has
+some flaws, it had some really good things, and they liked it
+for various reasons. But there are definitely mixed views on
+it.
+    Mr. Ross. Going back to the additional resources that you
+referenced in your report, have you made any requests on this
+Administration for those resources?
+    Mr. Stana. You mean, how many more it would take?
+    Mr. Ross. Yes. How many more it would take or what
+additional resources? When you referenced that you have limited
+authority to impose penalties, that you would need additional
+resources in order to achieve the adequate enforcement, have
+you made any requests on the current Administration for
+additional resources, whatever those----
+    Mr. Stana. No. Being from GAO, that wouldn't be in our
+bailiwick. That would be up to ICE and, by extension, DHS to
+ask for those resources.
+    Mr. Ross. Would you have any recommendation as to what
+those resources would be or should be to additionally allow
+them to do their enforcement?
+    Mr. Stana. You know, we would have to--actually that is the
+Administration's responsibility, to identify the resources they
+need, not us.
+    Mr. Ross. But you acknowledge that they don't have adequate
+resources.
+    Mr. Stana. They don't have the resources now to enforce
+the----
+    Mr. Ross. Fulfill their enforcement obligations.
+    Mr. Stana [continuing]. To enforce the I-9 system, let
+alone the E-Verify system.
+    Mr. Ross. Thank you. I yield back.
+    Mr. Gallegly. Mr. Pierluisi?
+    Mr. Pierluisi. Thank you, Mr. Chairman.
+    Sitting here today, I have to admit that I am troubled. I
+am troubled about the possibility of expanding or, even worse,
+making mandatory this E-Verify program, and I will explain why.
+It is simple.
+    I have two concerns. The first one, what are we doing with
+the 8 million estimated undocumented workers out there? Does
+anybody think that just by expanding this that these workers
+will disappear? All of them want to make a living and you
+cannot blame them for that. And they will find a way one way or
+the other. There is an underground economy, and we don't want
+to spur it or to encourage it more than it already is existing.
+And the problem with expanding E-Verify without also dealing
+with the immigration laws as a whole on a comprehensive basis
+is that this is like a band aid. It is one thing to have a
+voluntary program like this to allow employers to--to assist
+employers in verifying the documents of their workers. That is
+fine. But it is another to simply pretend that by making it
+mandatory, all of sudden 8 million people out there working
+will disappear as if this were magic.
+    I noticed that in the statement made by Director Bertucci,
+she says that she hopes that any changes to the E-Verify
+program--I quote--will be considered as a part of comprehensive
+reform to our immigration laws. So the first question I have
+is, do you agree with the premise of my concern that just
+dealing with this on its own is not going to solve the
+immigration issue our Nation faces?
+    Ms. Bertucci. Sir, I think that is the public policy
+decision that I would defer to the Department to respond to.
+    Mr. Pierluisi. Is it your hope that we deal with this issue
+on a comprehensive basis?
+    Ms. Bertucci. I don't get to hope in this job. [Laughter.]
+    Mr. Pierluisi. I see. But did I quote your statement
+correctly?
+    Ms. Bertucci. The Administration stands behind
+comprehensive immigration reform.
+    Mr. Pierluisi. I like hearing that. Okay.
+    Another concern I have is that by your own admission there
+are errors. Errors are being made as this program is
+implemented. There has been misuse by the employers as this
+program happens. At one point today, I think you even said that
+you have been--not you personally, but the center has been
+clumsy in trying to monitor the employers' compliance. And I
+even noticed that the Chairman is not happy with the compliance
+efforts on your part.
+    And let me add one that hasn't been talked about here which
+is discrimination. I saw that there is a 20 times higher chance
+to have an error when the individual involved is foreign-born.
+If somebody comes from abroad--and I got this figure from--let
+me tell you this figure because I see that your--Westat is my
+source for this. It has done a study and they determined that
+there is a 20 times higher chance that if you are born abroad,
+then there could be a problem. You could be legally in this
+country. You could be even documented. And the Ranking Member
+of this Subcommittee already pointed out to a particular case.
+    So that is my second question. What are you doing? Are you
+ready like our Ranking Member of the full Committee said? Are
+you ready to really expand this like some people are proposing?
+    Ms. Bertucci. Sir, first of all, the system can handle up
+to 60 million queries. We know that. We know today--during last
+year we handled 16 million, and our accuracy rate in that
+Westat study was 96 percent.
+    Having said that, it also acknowledges what GAO found, and
+we have undertaken a study. And what the name reference had to
+do with is the type of things that Mr. Stana talked about. In
+the systems that are controlled by DHS to a great extent if
+their records--not only DHS--well, other partners, but mostly
+DHS, I should say, CBP, us, and so on. It depends on how names
+are entered into records over a long period of time. That is
+when we may have possible problems with names.
+    Having said that, on contacting us, we are responding to
+those now. Through the improvements we have made, people aren't
+going and being pushed off to, say, the Social Security
+Administration where they have to show up. A great number of
+the people, if it is a DHS record mismatch, are coming to us.
+We are responding to those within 24 hours, and we are working
+with that person. No one--no one--one person being fired
+wrongly is one too many people. No one is being fired under
+those circumstances. We work with the people, and we will
+gather the information.
+    It is difficult. We are working with old systems. We
+acknowledge that, and those are some of the things we want to
+do to improve and make sure that we are building up our status
+verifiers. We have a group sitting in Buffalo. We are going to
+have another group in Nebraska. We have them in Los Angeles and
+New York. And their job is working everyday with people to
+ensure that the records match, you know, if there was that kind
+of a mismatch with names. And that is what is happening. And we
+have a study. Another study we will get by the end of this
+fiscal year on essentially those kinds of things, the
+difficulties with foreign names, foreign-born names, so that we
+can see what we can do to improve the system.
+    Mr. Pierluisi. My time is up.
+    Mr. Gallegly. Thank you very much, Mr. Pierluisi.
+    Ted Poe?
+    Mr. Poe. Thank you, Mr. Chairman.
+    Thank you for being here, both of you.
+    I am a believer, based on my background as a judge and the
+rule of law, and America is the most generous Nation on earth
+as far as allowing people to come here. We have an immigration
+policy that is very liberal in coming here the right way. I
+believe basically, though, you come here legally or you don't
+come. We all know the reasons that people say why they come
+here. I do not believe everybody that comes into the United
+States illegally is coming here to do work Americans won't do.
+I think that is just a fiction. So if we are going to follow
+the rules and follow the law, then people who are here
+illegally need to understand, whatever the political correct
+term to call those folks, they are still here illegally, and
+they need to come the right way.
+    E-Verify is a way to make sure that employers are hiring
+folks that are legally here. It is a frustration for many
+employers to make sure that they want to hire people that are
+here legally. And I think the E-Verify is a way that helps out
+employers, but also follows the rule of law.
+    Ms. Bertucci, I was in Houston last week and talking to
+some of your ICE agents about some of the issues that they face
+with the tremendous influx of people and problems that they
+have, and I just want to thank you for the work they are doing.
+I admire the work that the agency and the division--district in
+the Houston area is doing a good job.
+    How long has E-Verify been around?
+    Ms. Bertucci. The pilot began in 1997. The pilot began way
+back as the basic pilot in 1997.
+    Mr. Poe. 14 years. Is that right?
+    Ms. Bertucci. Yes.
+    Mr. Poe. 11 percent of the businesses use E-Verify. After
+14 years, we still only have 11 percent. Can you help me out
+why that is? Do you know? I mean, why are so few--I mean, that
+is 11 percent after so many years. It is going to take us--if
+we keep adding 10 percent in that length of time, it will be
+150 years before we have 100 percent. So why have so many been
+reluctant to use it?
+    Ms. Bertucci. I believe that the program's growth has been
+in the most recent years. When the program began, there were
+obvious challenges on the information technology front. We are
+growing each and every year. We more than doubled during the
+last couple fiscal years, and the program is voluntary. So that
+is how the growth has been. But it has been a steady pace; on
+average 1,300 new employers sign MOU's with us every single
+week. So we keep on growing the program.
+    Mr. Poe. How many false positives do you get a year?
+    Ms. Bertucci. False positives.
+    Mr. Poe. In other words, the system checks out so and so,
+and it is not correct. And so this person may be an American
+citizen, as Mr. Pierluisi was talking about earlier.
+    Ms. Bertucci. This is an opportunity to discuss the most
+often talked about statistic in this program when people say we
+have a 54 percent error. That statistic came out of the Westat
+2009 report. That same report said the system is overall
+correct, accurate 96 percent of the time. That report looked at
+a smaller segment of the population in the system. The Westat
+model found a 6.2 percent illegal or--I am sorry--unauthorized
+workforce in the country. It was very extensive statistics. My
+husband is the math major, not me.
+    But having said that, they looked at that model and they
+applied that model and they said we should have found 6.2
+percent people as unauthorized to work. We found 2.9 percent.
+That is where they believe--but they did not look at the actual
+records. They just assessed that figure based on a model.
+    Mr. Poe. So your opinion--it is 2.9 percent--is a fair
+statement or not?
+    Ms. Bertucci. No. I don't know that we have a good number
+on false accurate. The record from Westat was that that error
+rate at that time related to a total of 4 percent run in 2009.
+    But since then, we have made improvements. And our most
+recent 2010 numbers--and as Mr. Stana said, it may be an
+anomaly because we have had the Federal contractors come on.
+But Mr. Stana has recognized 5.4 percent decrease in our
+tentative nonconfirmations, and we are now at a 1.7 percent
+initial mismatch. We then find .3 percent of those people
+resolved, authorized to work, and the other 1.4 percent found
+unauthorized.
+    Mr. Poe. Last question, if I may, Mr. Chairman. Excuse me.
+I am running out of time.
+    Ms. Bertucci. Okay.
+    Mr. Poe. You are a potential employee. You go to business
+and it comes up E-Verify is a false positive. It says you are
+here illegally. What are my options as that worker?
+    Ms. Bertucci. As the worker?
+    Mr. Poe. Yes. It comes up a false positive saying that I am
+illegally in the country, and I am not.
+    Ms. Bertucci. I think Ms. Lotspeich--you may have not been
+here. So I apologize.
+    You have the right to contest that tentative
+nonconfirmation. At that point, that case is held in abeyance.
+Within 8 Federal work days you either visit the Social Security
+Administration or call us. We work with you and we will hold
+that case open, if we are working with you, until such time we
+resolve that data mismatch.
+    Ms. Lofgren. Would the gentleman yield?
+    Mr. Poe. Yes.
+    Ms. Lofgren. Because the GAO report actually indicates
+theoretically that is what is supposed to happen, but there are
+plenty of times when the employee is never notified, in
+violation of what is supposed to happen. And they can't fix it
+and they get fired even though they are an American. Isn't that
+correct, Mr. Stana?
+    Mr. Stana. Yes. If I can straighten out the numbers a
+little bit because I think there are a lot of numbers floating
+around here.
+    Of the 100 percent of people who go through the system,
+let's say 97.5 percent, to round it out, are deemed work-
+authorized instantaneously. Of the ones who are not authorized
+instantaneously, about .3 percent of them get it resolved
+within 48 hours or so. So you are really dealing with maybe 2.3
+to 2 percent of people who have this problem. It is a problem.
+    Now, getting to your earlier question, you asked how many
+false positives there are. These are false negatives that we
+are talking about, people who are inappropriately told that
+they are not authorized to work and they may be. And that is
+the issue you are talking about.
+    The false positives are at about 3-3.5 percent according to
+Westat, which means an individual is not authorized to work but
+somehow the system, either through identity theft or employer
+compliance with the individual getting a job inappropriately,
+identifies the individual as authorized to work.
+    Now, when you throw around all these statistics, it is easy
+to get lost in the numbers. But when you start matching the
+number sets up--and it is hard to do because it is not exactly
+the same point in time and it is not exactly the same data
+set--but you start getting to the point where getting much
+further down on the false negatives is going to be very
+difficult to do. It is important to do it because you have
+people like you talked about, Ms. Lofgren, who are getting a
+bad shake out of the system. So you don't want to lose that
+intent, but it is getting tough because you were ratcheting
+this down into the below 2 percent range.
+    The false positives--I don't know if we are ever going to
+get totally on top of that without having a better way to
+address the resource and enforcement question. It is not a
+matter of when or how. That is your call in what conjunction
+you do it. But that is the landscape here.
+    Mr. Gallegly. I thank the witnesses today. This is going to
+be an issue that we are going to be dealing with a great deal
+in this Congress.
+    I would just like to close by trying to respond to my good
+friend--and he truly is my good friend and my neighbor for many
+years--the Ranking Member, Mr. Conyers, and his statement ``why
+rush?"
+    I would just like to answer that by saying that this issue
+didn't start yesterday or day before yesterday. In fact, after
+IRCA in 1986, we thought this problem was going to be solved
+because we had a one-time amnesty--I guess that was the 1986
+version of comprehensive immigration reform--and that this
+problem would go away because we would have an enforcement
+mechanism. We never enforced.
+    Then we fast forward to 1996. That is still 14 years ago,
+and that is when we came up with this new concept of e-
+verification. Now, 14 years have passed, and I have been
+working on it for 14 years. So I don't think that I have really
+been rushing to it. But if there was ever a need to do
+something quickly when we have 14 million Americans that aren't
+working today, I think that they deserve to be put at the front
+of the line.
+    And I hope we can all work together. John, you are my
+friend and I know we can work together and maybe differ without
+being personal about it. I respect your friendship.
+    And with that, we will adjourn the meeting. Thank you.
+    [Whereupon, at 11:30 a.m., the Subcommittee was adjourned.]
+                            A P P E N D I X
+                              ----------
+               Material Submitted for the Hearing Record
+            Letter from Lynn Shotwell, Executive Director,
+              American Council on International Personnel
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+       Material submitted by the Migration Policy Institute (MPI)
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                                 <all>
+</pre></body></html>

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+<html>
+<title> - ``REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011''--UNLEASHING SMALL BUSINESSES TO CREATE JOBS</title>
+<body><pre>
+[House Hearing, 112 Congress]
+[From the U.S. Government Publishing Office]
+ ``REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011''--UNLEASHING SMALL
+                       BUSINESSES TO CREATE JOBS
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                   SUBCOMMITTEE ON COURTS, COMMERCIAL
+                         AND ADMINISTRATIVE LAW
+                                 OF THE
+                       COMMITTEE ON THE JUDICIARY
+                        HOUSE OF REPRESENTATIVES
+                      ONE HUNDRED TWELFTH CONGRESS
+                             FIRST SESSION
+                                   ON
+                                H.R. 527
+                               __________
+                           FEBRUARY 10, 2011
+                               __________
+                           Serial No. 112-16
+                               __________
+         Printed for the use of the Committee on the Judiciary
+[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
+      Available via the World Wide Web: http://judiciary.house.gov
+                              ______
+                  U.S. GOVERNMENT PRINTING OFFICE
+ 64-406 PDF               WASHINGTON : 2011
+-----------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
+area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC
+20402-0001
+                       COMMITTEE ON THE JUDICIARY
+                      LAMAR SMITH, Texas, Chairman
+F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
+    Wisconsin                        HOWARD L. BERMAN, California
+HOWARD COBLE, North Carolina         JERROLD NADLER, New York
+ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT,
+BOB GOODLATTE, Virginia                  Virginia
+DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
+STEVE CHABOT, Ohio                   ZOE LOFGREN, California
+DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
+MIKE PENCE, Indiana                  MAXINE WATERS, California
+J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
+STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
+TRENT FRANKS, Arizona                  Georgia
+LOUIE GOHMERT, Texas                 PEDRO PIERLUISI, Puerto Rico
+JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
+TED POE, Texas                       JUDY CHU, California
+JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
+TOM REED, New York                   LINDA T. SANCHEZ, California
+TIM GRIFFIN, Arkansas                DEBBIE WASSERMAN SCHULTZ, Florida
+TOM MARINO, Pennsylvania
+TREY GOWDY, South Carolina
+DENNIS ROSS, Florida
+SANDY ADAMS, Florida
+BEN QUAYLE, Arizona
+      Sean McLaughlin, Majority Chief of Staff and General Counsel
+       Perry Apelbaum, Minority Staff Director and Chief Counsel
+                                 ------
+       Subcommittee on Courts, Commercial and Administrative Law
+                 HOWARD COBLE, North Carolina, Chairman
+               TREY GOWDY, South Carolina, Vice-Chairman
+ELTON GALLEGLY, California           STEVE COHEN, Tennessee
+TRENT FRANKS, Arizona                HENRY C. ``HANK'' JOHNSON, Jr.,
+TOM REED, New York                     Georgia
+DENNIS ROSS, Florida                 MELVIN L. WATT, North Carolina
+                                     MIKE QUIGLEY, Illinois
+                      Daniel Flores, Chief Counsel
+                      James Park, Minority Counsel
+                            C O N T E N T S
+                              ----------
+                           FEBRUARY 10, 2011
+                                                                   Page
+                                THE BILL
+H.R. 327, the ``Regulatory Flexibility Improvements Act of 2011''     8
+                           OPENING STATEMENTS
+The Honorable Howard Coble, a Representative in Congress from the
+  State of North Carolina, and Chairman, Subcommittee on Courts,
+  Commercial and Administrative Law..............................     1
+The Honorable Steve Cohen, a Representative in Congress from the
+  State of Tennessee, and Ranking Member, Subcommittee on Courts,
+  Commercial and Administrative Law..............................    34
+The Honorable John Conyers, Jr., a Representative in Congress
+  from the State of Michigan, and Ranking Member, Committee on
+  the Judiciary..................................................    51
+                               WITNESSES
+Rich Gimmell, President, Atlas Machine & Supply, Inc.
+  Oral Testimony.................................................    55
+  Prepared Statement.............................................    58
+Thomas M. Sullivan, Of Counsel, Nelson Mullins Riley Scarborough,
+  LLP
+  Oral Testimony.................................................    65
+  Prepared Statement.............................................    67
+J. Robert Shull, Program Officer, Worker's Rights, Public Welfare
+  Foundation
+  Oral Testimony.................................................    76
+  Prepared Statement.............................................    78
+Karen R. Harned, Esq., Executive Director, National Federation of
+  Independent Business, Small Business Legal Center
+  Oral Testimony.................................................    84
+  Prepared Statement.............................................    87
+          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
+Prepared Statement of the Honorable Howard Coble, a
+  Representative in Congress from the State of North Carolina,
+  and Chairman, Subcommittee on Courts, Commercial and
+  Administrative Law.............................................     3
+Report submitted by the Honorable Steve Cohen, a Representative
+  in Congress from the State of Tennessee, and Ranking Member,
+  Subcommittee on Courts, Commercial and Administrative Law......    35
+Prepared Statement of the Honorable John Conyers, Jr., a
+  Representative in Congress from the State of Michigan, and
+  Ranking Member, Committee on the Judiciary.....................    53
+                                APPENDIX
+               Material Submitted for the Hearing Record
+Response to Post-Hearing Questions from Karen R. Harned, Esq.,
+  Executive Director, National Federation of Independent
+  Business, Small Business Legal Center..........................   105
+ ``REGULATORY FLEXIBILITY IMPROVEMENTS ACT OF 2011''--UNLEASHING SMALL
+                       BUSINESSES TO CREATE JOBS
+                              ----------
+                      THURSDAY, FEBRUARY 10, 2011
+              House of Representatives,
+                    Subcommittee on Courts,
+                 Commercial and Administrative Law,
+                                Committee on the Judiciary,
+                                                    Washington, DC.
+    The Subcommittee met, pursuant to call, at 1:33 p.m., in
+room 2141, Rayburn House Office Building, the Honorable Howard
+Coble (Chairman of the Subcommittee) presiding.
+    Present: Representatives Coble, Cohen, Conyers, Gowdy,
+Quigley, Reed, and Ross.
+    Staff present: (Majority) Daniel Flores, Subcommittee Chief
+Counsel; Allison Rose, Professional Staff Member; Ashley Lewis,
+Clerk; and James Park, Minority Counsel.
+    Mr. Coble. Good afternoon. The Subcommittee on Courts,
+Commercial and Administrative Law will come to order. Good to
+have the panel with us. I'll give my opening statement and
+recognize Mr. Cohen and also Mr. Conyers, I think he's with us,
+as well.
+    Most economic experts who argue that small businesses have
+small business trends drive and shape our economy which, in my
+view, is probably the most important issue confronting our
+country today. Small businesses are the source of almost half
+of our workforce and while I'm concerned about many economic
+factors, it's also my view that the government regulations have
+an inordinate impact on small businesses particularly.
+    While all businesses have to comply with municipal codes
+and permitting, county codes and permitting, state codes and
+permitting, Federal regulations can impose an even greater
+burden because most small businesses simply don't have the
+resources or the time to dispute or participate in the Federal
+regulatory process.
+    According to the Small Business Administration, businesses
+with fewer than 20 employees spent on average 36 percent more
+per employee than do larger firms to comply with Federal
+regulations. The SBA also claimed that these small employers
+represent 99.7 percent of all businesses that have created 65
+percent of all new jobs over the past 50 years.
+    Although it's clear that our economy may be showing signs
+of improvement, we're still suffering from job losses. Lack of
+job creation or however you like to describe it, it makes sense
+that we look to small businesses and work to create an
+environment that will help them prosper or should I say try to
+improve the environment in which they're currently struggling
+to survive?
+    I know that everyone here today supports small businesses
+and that everyone in this hearing room also wants to enact
+something that will help create jobs and economic growth. I
+sponsored H.R. 527 because I believe that improving the Small
+Business Regulatory Enforcement Fairness Act and the Regulatory
+Flexibility Act will have a lasting impact on small businesses
+that help support long-term small business growth.
+    Small businesses want and need our help and it's our
+responsibility, it seems to me, to ensure that our regulations
+are appropriate and in order and that our regulatory process is
+effective. Admittedly, I don't claim to be an expert on
+regulatory law and am anxiously awaiting the testimony of
+today's witnesses.
+    Of the many questions I have for the witnesses, I want to
+know most whether this legislation will help or empower small
+businesses enough in the regulatory process. If it does not,
+I'd be interested to know what needs to be done to change the
+bill to make it more effective.
+    I'm also very interested to hear about any concerns that
+the witnesses have about this legislation. Look forward to
+hearing from our panel and reserve the balance of my time.
+    [The prepared statement of Mr. Coble follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Coble. I'm pleased to recognize the distinguished
+gentleman from Tennessee, the Ranking Member, Mr. Cohen.
+    [The bill, H.R. 527, follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Cohen. Thank you, sir. I appreciate the recognition.
+Small businesses have a significant part of our Nation's
+economy and everybody knows they're so important for our
+Nation's health.
+    According to a March 2010 Small Business Administration
+report, firms employing fewer than 500 employees employed over
+half of the private sector workers in 2006. Additionally, small
+businesses can be drivers of innovation and economic growth, as
+well.
+    It's interesting to note, though, that both of these facts,
+the 500 employees, over half the growth, et cetera, have been
+true under the existing regulatory system that has been in
+place since 1980 when the Regulatory Flexibility Act was
+enacted.
+    Despite the testimony that we will hear today about how the
+RFA has been ineffective at stemming overbearing regulations
+that stifle small businesses, the fact is that small businesses
+have done well in the almost 36 years since the RFA, as amended
+in '96 by the Small Business Regulatory Enforcement Fairness
+Act, has been in place.
+    I'm concerned that the bill that's the subject of today's
+hearing, H.R. 527, the ``Regulatory Flexibility Improvements
+Act of 2011,'' may be a solution in search of a problem. In
+fact, it's very similar to a bill introduced in 2003,
+apparently to get at the oppressiveness of the Bush
+Administration's regulations on small business.
+    In the written testimony, the three majority witnesses all
+cite the same study by Nicole and Mark Crain that claims the
+Federal rulemaking imposes a cumulative cost of $1.75 trillion
+on the Nation's economy. Mr. Shull, one of our witnesses, will
+rebut the particulars of that study, I'm sure, but I will note
+that the Center for Progressive Reform, among others, has
+debunked the Crain study thoroughly, noting the study does not
+account for any benefits of regulation and it's relied on
+suspect methodology in reaching its conclusions.
+    I would like to ask unanimous consent, Mr. Chairman, that
+the CPR Report entitled Setting the Record Straight: The Crain
+and Crain Report on Regulatory Costs be entered into the
+record.
+    Mr. Coble. Without objection.
+    [The information referred to follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                              ----------
+    Mr. Cohen. Thank you, Mr. Chairman. Unfortunately for the
+proponents of H.R. 527, the Crain study appears to be the only
+statistical evidence that they can cite or can be cited in
+support of this notion that regulations impose undue cost on
+small business.
+    While I don't dispute that regulations can impose costs and
+that can cost-benefit analysis is a valuable tool for ensuring
+that agencies promulgate good regulations, I remain skeptical
+as to the degree of the purported problem as the proponents of
+H.R. 527 suggest.
+    I also take notion with the--take issue with the notion
+that the Federal regulations are to blame for what remains an
+unacceptably-high unemployment rate. If anything, current
+employment problems can be traced to a lack of adequate
+regulation of the financial services and housing industries
+which allowed for reckless private sector behavior that just
+about everybody recognizes as the cause of the Great Recession,
+the 2008 financial crisis, the most severe economic recession
+since the Great Depression. It was the lack of regulation that
+hurt us, not regulation.
+    Almost anything that can stand--anything can stand to be
+improved and I'm open to suggestions on how we can improve our
+regulatory process, particularly how it relates to small
+business, but H.R. 527 proposes some needlessly drastic
+measures that threaten to undermine public health and safety
+and waste public resources.
+    I point to three particular examples. First, I'm concerned
+about the requirement that as part of the Regulatory
+Flexibility Analysis, agencies must consider the indirect
+effect of a proposed or final rule. Although the bill attempts
+to put some sort of logical limit on this requirement by
+specifying that the required analysis be restricted to those
+indirect effects that are reasonably foreseeable, that
+qualification is insufficient.
+    Asking what is indirect and what is reasonably foreseeable
+still requires highly-speculative analysis. Forcing agencies to
+devote limited staff and resources to engage in such type of
+unwieldy, indeterminate and speculative analysis which would
+constitute nothing more than a guessing game is a waste of
+taxpayer money, putting government workers more and more to
+work on issues that are not going to result in an aid to our
+economy or small business.
+    Second, I'm troubled by the repeal of agencies' authority
+to waive or delay their Regulatory Flexibility Analysis in the
+event of an emergency. If we're truly concerned about
+flexibility in the rulemaking process, then at a minimum
+agencies ought to retain the ability to respond to an
+emergency. The rationale for appealing this emergency authority
+is not clear, at least not to me, other than as a general
+attack on rulemaking.
+    Third, I'm concerned that H.R. 527's look-back provision is
+simply a backdoor way for special interests to undermine
+existing health and safety regulations. You know, the Clean Air
+Act was passed in the EPA created by a Republican president,
+Richard Nixon, one of his crowning achievements, other than
+making the trip to China.
+    As Mr. Shull notes in his written testimony, agencies will
+be forced to rejustify longstanding rules ensuring the safety
+of the air we breathe, the water we drink, the food we eat, the
+products we buy, and the places we work, rules that most
+Americans support and rules that need to be maintained for the
+health and safety and welfare of the American public which is
+part of the government police powers that need to be
+maintained, enforced, and strengthened for the benefit of all.
+    I'm open to ideas on tweaking the regulatory process in
+modest ways to make regulatory compliance easier for small
+businesses and perhaps finding better ways for small business
+to provide input to specific rules. As drafted, though, H.R.
+527, a redraft of the 2003 law that's dusted off in the 2006
+law, now introduced as the 2011 law, simply goes too far and
+hasn't changed much in 8 years.
+    Thank you, Mr. Chairman. I yield back the remainder of my
+time.
+    Mr. Coble. I thank the gentleman. The Chair recognizes the
+distinguished gentleman from Michigan, the Chairman Emeritus of
+the House Judiciary Committee, for an opening statement.
+    Mr. Conyers. Thank you, Chairman Coble. I'm happy to be
+serving on this Committee and I repeat my congratulations to
+you for assuming the Chairmanship of this Committee. You're a
+senior Member of Judiciary and we respect that so very much.
+    Now on January 24, our Subcommittee had hearings on the
+REINS Act. Now this was our colleague from Kentucky Jeff
+Davis's notion that all regulations ought to be approved or
+disapproved by the Congress and apparently the notion of the
+Separation of Powers Doctrine could be set aside in this
+instance.
+    I don't know how in the world after we pass a law, obligate
+the appropriate Federal agency to deal with it, we then say
+that any regulation has to be approved by us. So we come back
+and we legislate on what they're doing to implement the law
+that we passed in the first place and your speed, Chairman
+Coble, is remarkable because you introduced this bill and here
+we are 2 days later holding hearings on it. I envy that. I
+tried to do that when I was Chair of this Committee and I was a
+miserable failure. We never could move with that kind of speed.
+    Of course. I yield.
+    Mr. Coble. I did not introduce it. I think the Chairman of
+the full Committee introduced it.
+    Mr. Conyers. Oh, Smith. Oh, well, then that explains the
+speed then.
+    Mr. Coble. I'm not as good as you think.
+    Mr. Conyers. No. This Chairman is swifter than the previous
+Chairman and I will discuss this a little bit more, but here's
+what I'm looking at.
+    In addition to what Steve Cohen just talked about, a
+credible cost that is alleged to be occurring, the whole notion
+that this will cost almost $2 trillion is--well, I'll just read
+the one quote from here.
+    ``It's easy to see why the anti-regulatory critics have
+seized on the Crain and Crain Report and its findings.'' That's
+the one that Mr. Cohen just put in the record. ``The 1.75
+trillion figure is a gaudy number that was sure to catch the
+ear of the media and the general public. Upon examination,
+however, it turns out that the 1.75 trillion estimate is the
+result of transparently unreliable methodology and is presented
+in a fashion calculated to mislead.''
+    I'd like to ask all of the four witnesses to be prepared to
+respond to this at any time during this hearing.
+    The other matter is the OMB Watch Statement on the
+Regulatory Flexibility Improvements Act and there are five
+problems that deeply concern them about this proposed
+legislation. One, it adds yet another analytical layer to the
+rulemaking process, further complicating agencies' ability to
+implement statutes for full admissions and serve the public
+interests.
+    This measure before us gives more power to the Small
+Business Administration, Office of Advocacy, which is in fact
+an office of taxpayer-subsidized industry lobbyists who funnel
+the objections of businesses into agency decision-making.
+    Three, it politicizes important decisions about public
+protections, potentially allowing economists and political
+offices to overrule agency scientists and other experts.
+    Four, it would actually make it more difficult for agencies
+to review and revise existing regulations by forcing agencies
+to use a formula to decide which rules to review rather than
+reviewing the rules at their discretion.
+    And finally, it's an unfunded mandate, asking much of
+agencies but authorizing no additional resources.
+    Get the picture? I do, and that's why this is so important.
+I'm concerned that in this time of fiscal restraint, this bill
+will result in wasting public resources and there are several
+other reasons that I'd like to bring to your attention, but I
+think I can bring it up safely in the course of our
+discussions, and I thank Chairman Coble for his generosity in
+terms of time.
+    Mr. Coble. I thank the gentleman and all other opening
+statements will be made a part of the record without objection.
+    [The prepared statement of Mr. Conyers follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Coble. We're pleased to have an outstanding panel
+today. I will introduce them from my left to right.
+    Mr. Richard Gimmel is the President and third-generation
+owner of Atlas Machine and Supply, Inc., based in Louisville,
+Kentucky. The company is a 104 years old and has branches in
+Ohio and Indiana. Mr. Gimmel says of his position, ``It's my
+responsibility to do all I can to grow, strengthen, and improve
+the company and then to pass it on,'' and his son Richard
+Gimmel III heads the company's Engineering Division.
+    In addition to presiding at Atlas Machine and Supply, Inc.,
+Mr. Gimmel sits on the Board of Directors at the National
+Association of Manufacturers and he received his MBA from
+Bellarmine University. Did I pronounce that correctly, Mr.
+Gimmel? Bellarmine in Kentucky. Good to have you with us.
+    Mr. Thomas Sullivan is Of Counsel of Nelson Mullins Riley
+and Scarborough, LLP, in Washington. Mr. Sullivan also heads
+the Small Business Coalition for Regulatory Relief. In the
+past, Mr. Sullivan served as Chief Counsel for Advocacy at the
+Small Business Administration, worked with the National
+Federation of Independent Business, served on Congressional
+Affairs staff of the U.S. Environmental Protection Agency, and
+was an official of the University Department of Justice,
+Environment, and Natural Resources Division.
+    Mr. Sullivan earned his Juris Doctorate Degree from Suffolk
+University School of Law.
+    Mr. Robert Shull is our third witness and is a Program
+Officer for Worker's Rights at the Public Welfare Foundation in
+Washington, D.C. Prior to coming to the Public Welfare
+Foundation, Mr. Shull was the Deputy Director for Auto Safety
+and Regulatory Policy at Public Citizen and Director of
+Regulatory Policy at OMB Watch.
+    Our fourth witness, Mr. Karen Harned, is the Executive
+Director of the National Federation of Independent Business,
+Small Business Legal Center. Prior to coming to NFIB, Ms.
+Harned worked as an associate at Olsson, Frank, and Weeda, PC,
+and on the staff of Senator Dodd Nichols of Oklahoma.
+    She earned her BA Degree from the University of Oklahoma
+and her JD Degree from the George Washington University School
+of Law.
+    Now I am told that there is a Floor Vote imminent. So we'll
+have to just wait until the bell rings.
+    Ladies and gentlemen, we try to comply with the 5-minute
+rule and we try to apply that to us as well as to you all. So
+when you see the amber light appear in your face, you will know
+the ice on which you're skating is getting thinner but nobody
+will be keelhauled for violating but we would appreciate your
+staying within the 5-minute rule, if you could. When the red
+light appears, that is your warning that the 5 minutes have in
+fact expired.
+    Good to have each of you with us. Mr. Gimmel, why don't you
+kick it off?
+              TESTIMONY OF RIC GIMMEL, PRESIDENT,
+                  ATLAS MACHINE & SUPPLY, INC.
+    Mr. Gimmel. Well, Mr. Chairman, I appreciate the
+opportunity to be here and I kind of feel a little out of
+place. I'm probably the only person up here that doesn't do
+this for a living. I mean, I run a machine shop, so I hope
+you'll bear with me----
+    Mr. Coble. We will, indeed.
+    Mr. Gimmel [continuing]. In that regard. My company, Atlas
+Machine, is based in----
+    Mr. Coble. Mr. Gimmel, pull that mike a little closer to
+you, if you will.
+    Mr. Gimmel. Yes. My company is Atlas Machine & Supply.
+We're based in Louisville. I have 200 employees, a 104-year-old
+company, third, actually fourth generation now with my son
+taking over in Engineering.
+    I also serve on the Board of the National Association of
+Manufacturers and am pleased to testify on their behalf today.
+    The United States is the world's largest manufacturing
+economy. It produces 1.6 trillion of value each year and
+employs 12 million Americans working directly in manufacturing.
+    On behalf of the NAM and the millions of men and women
+working in manufacturing in the United States, I want you folks
+to know that we support your efforts to reform the RFA and to
+unleash the small manufacturers of this country to do what they
+do best which is to make things and create jobs and, I might
+also add, to pay taxes.
+    Manufacturers have been deeply affected by the most recent
+recession. This sector lost 2.2 million jobs during this
+period. Our own company suffered the worst downturn since the
+Great Depression. So far, only 6.2 percent of these jobs have
+come back and the numbers show that American manufacturing is
+growing more slowly than in the countries we have to compete
+with.
+    We have seen policies from Washington that will not help
+our economic recovery and can actually discourage job creation.
+Some have proposed policies that fortunately have not yet been
+enacted, such as huge increases in the individual income tax
+rate, the Employee Free Choice Act, the so-called cap and trade
+legislation.
+    We still face threats from an EPA that we believe is out of
+control and a healthcare mandate that appears to make the
+business healthcare burden even worse. All of these will worsen
+our ability to compete as a Nation. To regain manufacturing
+momentum and to return to net job gains, we need improved
+economic conditions and we need improved government policies.
+    In recent years, many of us in manufacturing have
+transformed our operations. We've adopted a Japanese principle
+some of you may have heard of. It's called ``lean thinking.''
+The concept is very simple. You just identify everything in the
+organization that consumes resources, that adds no value to the
+customer. That's called ``muda'' or waste. Then you look for a
+way to eliminate the muda.
+    Our modest proposal is that the government learns from
+manufacturing and incorporates lean thinking into the
+regulatory process. Many of the proposals that are being
+offered by this Subcommittee, including more detailed
+statements in the RFA process and requirements to identify
+redundant, overlapping, or conflicting regulations, will do
+just that.
+    My written statement details our support for amendments to
+the periodic review requirements of the RFA, thus applying lean
+thinking and continuous improvement, another manufacturing
+principle, to the regulatory process.
+    It's crucial that agency action be made mandatory when
+these inefficiencies are identified. The gains could be
+tremendous, as we found on the factory floor.
+    My written remarks also detail examples of the damage to be
+done by runaway regulation at the agency level, including the
+EPA's ozone proposals. One estimate is that the most stringent
+standard under consideration would result in the loss of 7.3
+million jobs by 2020 and one trillion per year in new
+regulatory costs, beginning 2020.
+    Manufacturers hope that this legislation is just the
+beginning of a more thoughtful regulatory system built on
+common sense with an understanding of modern manufacturing.
+    A few days ago, the President appeared before business
+leaders here in Washington. He urged us to ``get in the game,''
+those were his words, and to invest in growth and job creation
+and I'm here to tell you we would love to do just that, but we
+don't invest our personal assets just because somebody, even
+the President, tells us we should. We do so because we believe
+the environment is right and that good opportunities exist for
+return on the investment and job creation.
+    Many of the NAM's members are family businesses, like our
+own. We want to invest to grow. That's why we exist. But when
+our government creates policies, laws, and regulations that
+increase the cost of doing business, the natural reaction by
+small businesses, in particular, is to simply hunker down and
+wait things out.
+    Manufacturers in the United States created the middle
+class. We can regain our momentum with the right policies in
+place. I'm confident that our Nation's leaders will take action
+to promote and not increase the risks of investment and job
+creation and the NAM stands ready to assist you in this effort.
+    Thank you, and I'll look forward to any questions.
+    [The prepared statement of Mr. Gimmel follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Coble. Mr. Sullivan?
+         TESTIMONY OF THOMAS M. SULLIVAN, OF COUNSEL,
+             NELSON MULLINS RILEY SCARBOROUGH, LLP
+    Mr. Sullivan. Thank you, Mr. Chairman, Members of the
+Subcommittee.
+    I'm pleased to present testimony in strong support of H.R.
+527, the ``Regulatory Flexibility Improvements Act of 2011.''
+    I'd like to briefly summarize, so I ask that my full
+written statement be made part of the record.
+    Mr. Coble. Without objection.
+    Mr. Sullivan. There are three basic reasons for the
+Regulatory Flexibility Act. One size fits all Federal mandates
+do not work when applied to small business; second, small
+business face higher costs per employee to comply with Federal
+regulation than their larger competitors, and, third, small
+business is critically important to the American economy.
+    The Regulatory Flexibility Act has not worked as well as it
+can to address regulatory challenges faced by small business.
+That's why I support H.R. 527 and how it will improve the law's
+effectiveness.
+    Before I get into detail about the provisions in the bill
+that are particularly important, I want to point out why
+there's an immediate need for these reforms. In the last 2
+years, the Federal Government issued 132 economically-
+significant regulations. Rulemakings are not slowing down
+either. There are a 181 more new regulations underway now than
+there were last year, representing a 5-percent increase in
+activity.
+    According to plans issued recently by regulatory agencies,
+there is a 20 percent increase in significant regulations
+currently under development.
+    As far as H.R. 527 and its benefits on how it will improve
+the Regulatory Flexibility Act, currently, the law requires
+agencies to analyze the direct impact a rule will have on small
+entities. Unfortunately, limiting the analysis to direct
+impacts does not accurately portray how small entities are
+affected by a new Federal rule.
+    For instance, when EPA's greenhouse gas regulations impose
+a direct cost on electric utility, EPA should make public how
+its proposal will likely affect the cost of electricity for
+small businesses. I believe the rulemaking process is
+shortchanged by not including discussion about the obvious
+ripple effects of regulations on small business and H.R. 527
+tries to correct this.
+    All agencies should utilize small business advocacy review
+panels. When I was Chief Counsel for Advocacy, I did not think
+that the Regulatory Flexibility Act needed to be amended to
+force every agency to convene small business panels the way
+that EPA and OSHA do under the Small Business Regulatory
+Enforcement Fairness Act. I thought that agencies could do a
+good enough job soliciting input from small businesses on their
+own. Now, I realize some agencies will resist formally
+soliciting help from small entities prior to issuing proposed
+rules.
+    Requiring the Consumer Financial Protection Bureau that was
+created out of the Dodd-Frank Financial Reform Law to have to
+use the small business panel process made sense. That's why it
+was passed into law. The same logic applies across the board to
+all Federal agencies and that's why the small business panel
+process, under the Small Business Regulatory Enforcement
+Fairness Act, should become the norm, not the exception.
+    The Small Business Administration's Office of Advocacy
+should clarify definitions in the Regulatory Flexibility Act.
+The disputes over whether an agency's proposal will ``impose a
+significant economic impact on a substantial number of small
+entities'' have limited the effectiveness of the Regulatory
+Flexibility Act.
+    H.R. 527 addresses this problem by giving the Office of
+Advocacy rulemaking authority. The rules promulgated by the
+Office of Advocacy will better define how agencies are to
+properly consider small business impacts and that will benefit
+the process in two ways.
+    First, it will minimize confusion over whether agencies are
+properly considering small business impact, and, second,
+rulemaking authority by the Office of Advocacy will confirm the
+primacy by the Chief Counsel for Advocacy when courts
+ultimately render opinions on the Regulatory Flexibility Act.
+    The periodic review of regulations under the Reg Flex Act
+should be improved. H.R. 527 will bolster the effectiveness of
+the look-back provision by broadening the number of rules
+agencies will review, requiring transparency of those reviews,
+and by better defining the process through the Office of
+Advocacy's rulemaking.
+    There are additional reforms that Congress can consider to
+benefit small business. I'm happy to work with this Committee
+to explore additional legislative efforts beyond amending the
+Reg Flex Act that will help create an economic climate so small
+businesses have an easier time growing and creating jobs.
+    Thank you.
+    [The prepared statement of Mr. Sullivan follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Coble. Thank you, Mr. Sullivan.
+    Mr. Shull, I was in law school long, long ago with a chap
+whose surname was Shull. Do you have Carolina kin?
+    Mr. Shull. That's not--you know, I don't know. There's a
+large network of Shulls out there whose connection with our
+Shulls we don't know yet.
+    Mr. Coble. Well, he was a good fellow. He had high honors
+in law school.
+    You're recognized, Mr. Shull.
+TESTIMONY OF J. ROBERT SHULL, PROGRAM OFFICER, WORKER'S RIGHTS,
+                   PUBLIC WELFARE FOUNDATION
+    Mr. Shull. Well, then I have quite an act to live up to.
+    I want to thank you for the opportunity to testify. These
+are very important issues for small business owners, for their
+families, for their communities, for their customers, for their
+workers, for really all of us.
+    I want to start with the proposition that agencies don't
+regulate for the sake of regulating. They regulate because they
+have been charged by Congress with the task of getting things
+done to protect the public and to protect the public's health,
+its safety, the environment, the air we breathe, the water we
+drink, the food we eat, the products we buy, the traffic
+conditions in which we all drive, the jobs that we go to. These
+are important tasks, and there are new regulations in the
+works. There will always be new regulations in the works
+because the world is changing--and as the world changes, we
+discover that there are unmet needs for public protection.
+    I'll give you an example. In the world of auto safety,
+thanks to important regulations, like the mandates for
+seatbelts, mandates for airbags, mandates for side impact
+protection, even as simple a rule as the fact that the steering
+column collapses now whereas it used to be a solid piece of
+metal that would impale the driver in some crashes: Now, all of
+that means that people are coming away surviving crashes that
+just years ago they wouldn't have been able to survive. But
+we're increasingly discovering because people's lives are being
+saved, that there are still new needs to protect vehicle
+occupants in crashes. For example, because they are now
+surviving a larger number of crashes, we're increasingly
+discovering that they're coming away with injuries to their
+lower extremities, to their legs and their feet, which opens
+the door to the fact that there may not be sufficient
+protection at the bottom of the car, the tire wheel well, and
+intrusion into that part of the survival zone of the vehicle,
+and so the National Highway Traffic Safety Administration
+should be looking at that and should be developing new
+regulations in that regard.
+    Automakers have increasingly computerized motor vehicles.
+They're becoming more and more like the computers on wheels. A
+new research report found that some of these computer systems
+which control, in some cases, really critical functions of an
+automobile, like the brakes, can be hacked by folks outside of
+the car and so it really behooves NHTSA to start looking into
+whether or not the performance of these computerized components
+is adequately protecting vehicle occupants.
+    So the fact that there are new regulations on the book
+doesn't necessarily mean that we have runaway agencies. It just
+means that we have agencies that are doing what they're
+supposed to do, assessing the public's unmet needs and
+assessing what needs to be done to protect the public.
+    I also want to start with the proposition that small
+businesses, I think we all agree, are vital. Small businesses
+also are owned by small business owners who have families, who
+live in communities, who have employees, who have coworkers and
+neighbors, who themselves are breathing this air, drinking the
+water, eating the food, buying products, getting out on the
+road and going to work every day. They receive the benefits of
+regulation, not just shoulder the burden of its costs.
+    And we hear a lot about costs today, but one of the
+assumptions that seems to be here in the RFIA is that analysis
+and review and all the new layers of process that would be
+mandated by this bill are somehow costless. But the fact is all
+of this is going to require money or agency time and diversion
+of agency resources away from the task of assessing the
+public's unmet needs and toward the task of reviewing in many
+cases protections that we know beyond a shadow of a doubt are
+incredibly important, like the removal of lead in gasoline. You
+can measure the value of that in our children's IQ points.
+    I am concerned that this bill would paralyze the regulatory
+agencies we need to protect the public and keep them from
+getting things done to protect the public.
+    I'll wrap up with the suggestion that we do want our
+businesses to compete with China but we don't want this Nation
+to become China with the dirty air and the unsafe workplaces
+they have.
+    [The prepared statement of Mr. Shull follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Coble. Thank you, Mr. Shull.
+    Ms. Harned, we'll be glad to hear from you.
+    TESTIMONY OF KAREN R. HARNED, ESQ., EXECUTIVE DIRECTOR,
+  NATIONAL FEDERATION OF INDEPENDENT BUSINESS, SMALL BUSINESS
+                          LEGAL CENTER
+    Ms. Harned. Thank you. Good afternoon, Chairman Coble and
+Ranking Member Cohen.
+    NFIB, the Nation's largest small business advocacy
+organization, appreciates the opportunity to testify on the
+burdens and effects of regulation on small business and how
+H.R. 527 would address many of those concerns.
+    Overzealous regulation is a perennial cause of concern for
+small business owners and is particularly burdensome in times
+like these when the Nation's economy remains sluggish.
+According to a recent study, regulation costs the American
+economy 1.75 trillion every year and, more concerning, small
+businesses face an annual regulatory cost of $10,585 per
+employee which is 36 percent more than the regulatory cost
+facing businesses with more than 500 employees.
+    Recently, the Administration did acknowledge that excessive
+and duplicative regulation has damaging effects on the American
+economy. NFIB believes that it has been a long time coming for
+small business owners to hear the Administration emphasize the
+harmful effects of over-regulation on small business and job
+creation. We will be watching closely to see if last month's
+directive leads to real regulatory reform.
+    In the meantime, NFIB believes that Congress must take
+actions to level the playing field. Congress should expand the
+Small Business Regulatory Enforcement and Fairness Act and its
+Small Business Advocacy Review Panels to all agencies,
+including independent agencies. In so doing, all agencies would
+be in a better position to understand how small businesses
+fundamentally operate, how the regulatory burden
+disproportionately impacts them, and how each agency can
+develop simple and concise guidance materials.
+    Moreover, Congress's advocacy should ensure that agencies
+are following the spirit of SBREFA. There are instances where
+EPA and OSHA have declined to conduct a SBAR panel for
+significant rule and/or rule that would greatly benefit from
+small business input. Congress should ensure agencies perform
+regulatory flexibility analyses and require them to list all of
+the less burdensome alternatives that were considered. Each
+agency should provide an evidence-based explanation for why it
+chose the more burdensome versus less burdensome option and
+explain how their rule may act as a barrier to entry for a new
+business.
+    Section 610 reviews should be strengthened. H.R. 527 would
+require agencies to amend or rescind the rules where the 610
+reviews show that the agency could achieve its regulatory goal
+at a lower cost to the economy.
+    NFIB also believes that Congress should explore requiring
+agencies to provide updated information on how each agency
+mitigates penalties and fines on small businesses as currently
+required by SBREFA but also require that such a report be
+completed on an annual basis.
+    Regulatory agencies often proclaim indirect benefits for
+regulatory proposals but decline to analyze the make publicly
+available the indirect costs to consumers, such as higher
+energy costs, jobs lost, and higher prices. Agencies should be
+required to make public a reasonable estimate of a rule's
+indirect impact.
+    Agencies should be held accountable when they fail to give
+proper consideration to the comments of the Office of Advocacy
+and affordable mechanisms should be considered for resolving
+disputes regarding economic costs of a rule between the agency
+and advocacy.
+    NFIB believes that the Office of Advocacy needs to be
+strengthened. The office should have the ability to issue rules
+governing how agencies should comply with Regulatory
+Flexibility requirements. Because of improvements inherent
+within H.R. 527, NFIB is hopeful that review of agency actions
+will be strengthened and the small business voice will be more
+substantively considered throughout the regulatory process.
+    NFIB is concerned that many agencies are shifting from an
+emphasis on small business compliance assistance to an emphasis
+on enforcement. Congress can help by stressing to agencies that
+they devote adequate resources to help small businesses who do
+not have the benefit of inside counsel and HR people to comply
+with the complicated and vast regulatory burdens that they
+face.
+    Congress also should pass legislation waiving fines and
+penalties for small businesses the first time they commit a
+non-harmful error on regulatory paperwork. Mistakes in
+paperwork will happen. If no harm is committed as a result of
+the error, agencies should waive penalties for first-time
+offenses and help owners to understand the mistakes they make.
+With high rates of unemployment continuing, Congress needs to
+take steps to address the growing regulatory burdens on small
+business. The proposed reg reforms in H.R. 527 are a good first
+step.
+    Thank you.
+    [The prepared statement of Ms. Harned follows:]
+                 Prepared Statement of Karen R. Harned
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Coble. Thank you, Ms. Harned. Thanks to all of you.
+    As I said at the outset, we try to apply the 5-minute rule
+to us, as well. So if you all could keep your responses terse,
+we would appreciate that.
+    And at the outset, I want to apologize for my raspy voice.
+I am coming down with my annual midwinter cold, so I know this
+doesn't sound good. So you all bear with me.
+    Mr. Sullivan, Elizabeth Warren, the Consumer Advocate and
+head of the new Consumer Financial Protection Bureau, has
+embraced and, I've been told, has warmly embraced the new
+obligations to comply with Regulatory Flexibility requirements.
+    Now most oftentimes regulatory discussions involve to the
+right of center or to the left of center, depending upon the
+position of the advocate, and I would assume that it is not
+believed that Ms. Warren would probably to the left of center.
+    If she can embrace these proposals, it seems to me all
+agencies should be comfortable doing likewise. What do you say
+to that, Mr. Sullivan?
+    Mr. Sullivan. Mr. Chairman, I agree with you. Elizabeth
+Warren, who traveled up to Maine a few weeks ago with Senator
+Snowe, actually embraced the amendment that was part of the
+Dodd-Frank Financial Regulatory Reform Bill, saying that she
+would have done the type of analysis that we're talking about
+here today, even if it weren't required by law.
+    So if you had Federal regulators with that attitude at
+every agency, they would be embracing the idea of having small
+business advocacy review panels because it is through those
+panels you get constructive input on how agencies can regulate
+better, meet their objectives while minimizing costs on small
+firms.
+    So perhaps after Professor Warren sets up the Consumer
+Financial Protection Bureau, we can all work to get her in
+front of other regulatory agencies to preach that type of
+gospel.
+    Mr. Coble. I applaud you, sir. And, folks, I don't want to
+in any way imply that I'm advocating compromising safety. I
+don't want that to come out of this hearing because I don't
+want to do that.
+    Mr. Gimmel, what challenges do Federal regulations present
+to your company today as it attempts to create additional jobs
+in this economy?
+    Mr. Gimmel. Well, the first one is simply understanding
+what they are. We're a small company. We're a machine shop, and
+there are literally tens and tens and tens of thousands of
+pages of regulations that we have to not just comply with but
+understand and I just have to tell you that the burden of that
+is really overwhelming for any single business to effectively
+do.
+    We have had--in our case, we have people, two people full
+time that are dedicated to compliance. Much of this is dealing
+with compliance that is fruitful. Regulations are not something
+that we are speaking against here, Mr. Chairman. We believe
+regulation is necessary. We believe protection of the worker,
+protection of the environment, fair taxation, et cetera, are
+certainly necessary.
+    What we're talking about here is a process that we feel has
+resulted in redundant and inefficient network of sometimes
+overlapping regulations and there seems to be a lot of support
+for that regardless of what your political orientation is. We
+have the same objective.
+    Mr. Coble. Thank you, sir. Mr. Shull, you suggest that H.R.
+527 would wrap Federal programs up in costly, time-consuming,
+and unnecessary red tape, putting consumers, and working
+families at risk of harm.
+    If the regulation, for example, discourages small business,
+would not the working family that lost his job be in a box?
+    Mr. Shull. Well, you know, I think that that would be a
+concern if that were the case, but there's not really any proof
+that regulation harms competitiveness of industry, harms jobs,
+harms trade flows. There's a document I'd be happy to submit
+for the record that OMB Watch produced in the mid 2000's called
+Regulation and Competitiveness as well as an article by an
+economist, Frank Ackerman, called The Unbearable Lightness of
+Regulatory Costs.
+    Both of these are documents that exhaustively go through
+the studies that have been conducted and found that there
+really is no evidence that regulations have harmed the U.S.
+competitiveness or have harmed jobs.
+    Now, I mean, when it comes to, say, jobs, OSHA, for
+example, is not in the business of destroying jobs. It's in the
+business of making sure that jobs don't destroy workers, and
+those are really critical concerns.
+    Mr. Coble. The red light has illuminated, so I will yield
+to the gentleman from Tennessee, Mr. Cohen.
+    Mr. Cohen. Thank you, Mr. Coble.
+    First of all, Mr. Gimmel, I know you come here with a heavy
+heart for I saw the overtime and it wasn't pretty. You are a
+Louisville fan, as well, I presume.
+    Mr. Gimmel. Well, I'd prefer to think that we are not
+adversaries, Congressman Cohen, except when it comes to maybe
+basketball and football.
+    Mr. Cohen. We're not. I like Louisville and I was cheering
+for them last night and they had a terrible overtime.
+    Mr. Gimmel. I am a Louisville fan, so don't put me in that
+category with those guys down the road there.
+    Mr. Cohen. Okay. You mentioned in your----
+    Mr. Coble. If Mr. Cohen would yield? I missed it. What was
+the game in question?
+    Mr. Cohen. Louisville and Notre Dame.
+    Mr. Coble. Well, Carolina and Duke were playing yesterday,
+so I missed Louisville.
+    Mr. Cohen. Should I ask who won?
+    Mr. Coble. I don't want you to do that.
+    Mr. Cohen. I won't ask who won.
+    Mr. Gimmel. Memphis won, though, I know that.
+    Mr. Cohen. Let me ask you this, Mr. Gimmel. The EPA, you
+mentioned in your opening remarks, what parts of the EPA would
+you keep and what parts of the EPA would you not want to keep?
+    Mr. Gimmel. As it relates to manufacturing, what we see is
+an overlapping series of, for instance, air quality rules,
+Federal versus local in our case. In Jefferson County in
+Louisville, we have two different sets of qualifications that
+we have to comply with, both of which are very, very complex.
+Part of that, of course, is a local problem.
+    In the case of EPA, I think what we would like to see is a
+system that addresses the efficiency of each of the regulations
+in place, much like President Clinton started in 1993. I
+believe he called it the National Performance Review, and it
+wound up eliminating, as it sought out redundancy, as it sought
+out duplicative and no longer necessary regulation or
+inefficient application of regulation, we were able to
+eliminate some 16,000 pages of regulations that they
+determined, the Clinton Administration determined was
+unnecessary at the time.
+    We would like to see that same approach. We are certainly
+in favor of clean water and clean air, but we think that a lean
+approach to the process could yield tremendous savings because
+our competition is not just with how our economy used to be
+here any more. Our competition is global right now and we're
+competing against people that operate on a different set of
+rules and in some cases more efficient regulatory processes
+than we have.
+    Mr. Cohen. I noted in your remarks, you did comment that we
+need to have clean air and clean water, et cetera, and I
+appreciate that understanding.
+    Mr. Gimmel. And as you point out, we're beneficiaries of
+that, sir.
+    Mr. Cohen. Right. All of us are. The Chinese, of course, as
+Mr. Shull pointed out, don't have this government regulation in
+this area. They have it in other areas and so they have the
+worst water and air quality possible but the highest
+productivity and I don't know about the Japanese. You mentioned
+them. I think they're--Mr. Shull, you might know and somebody
+else here might know, but I don't think the Japanese have got
+the best air quality. I think they've got some problems there
+with that.
+    Mr. Shull, let me ask you this. You talked about the--we
+talked about the indirect effects that are in the proposed
+rule. Would you elaborate on your concerns and tell us if you
+think that anything dealing with indirect effects could result
+in industry going to court to challenge decisions there?
+    Mr. Shull. Sure. So the bill would amend the Regulatory
+Flexibility Act requirements of these analyses for the effects
+on small entities by requiring agencies not just to look at the
+impacts on the regulated small entities that would be covered
+by a regulation but also any small entity outside of the world
+of regulated small entities for whom there would be reasonably
+foreseeable economic consequences, adverse or beneficial.
+    It's hard to know where that stops. So, for example, if
+NHTSA really gets on the ball and starts regulating to improve,
+say, protection of vehicle occupants' lower extremities, NHTSA
+would probably have to, under this legislation, look at the
+consequences not just for the automakers, not just for the
+suppliers who make the parts that go into motor vehicles but
+also the car dealers.
+    Now under recent revisions to the SBA size standards, most
+new car dealers in this country, somewhere between 83 to 93
+percent of them, would be counted as small businesses and that
+includes even a car dealer who makes up to, say, a $120 million
+in receipts. So these are actually not terribly small, not
+terribly inexpensive--these are not economically-struggling
+entities.
+    Then when you think about--if you're thinking about the
+impacts on, say, those auto dealers, they conceivably hire
+payroll services to handle their payroll. They conceivably hire
+janitorial services to clean their facilities. They
+conceivably--they do buy ads from local TV and radio and
+newspapers.
+    Now, all of those small entities----
+    Mr. Coble. Mr. Shull, if you could wrap up pretty----
+    Mr. Shull. Oh, of course. It's turtles all the way down.
+There's really no conceivable limit to what agencies would be
+forced to assess and the point at which wealthy corporate
+special interests could sue them for having failed to consider.
+    Mr. Cohen. Thank you, sir, and I will--even though the
+first minute of my time was dedicated to Sports Center, I will
+yield back the remainder of my time.
+    Mr. Coble. The Chair recognizes the distinguished gentleman
+from South Carolina, Mr. Gowdy, for 5 minutes.
+    Mr. Gowdy. Thank you, Mr. Chairman, and thank you for
+conducting these hearings.
+    Mr. Sullivan, I'm going to put your legal acumen on
+display. Rules and regulations, the violations thereof, can
+they be evidence of negligence in a civil suit?
+    Mr. Sullivan. Could you ask the question one more time?
+    Mr. Gowdy. Violations of rules and regulations, can they be
+used as evidence of negligence if Mr. Gimmel is sued in a civil
+suit?
+    Mr. Sullivan. I don't know.
+    Mr. Gowdy. Do you know whether or not any of the rules and
+regulations have criminal provisions where Mr. Gimmel could in
+theory suffer criminal consequences because of a rule or
+regulation that is not promulgated by Congress but is by
+someone who's unelected, yet he stands to face criminal
+sanctions if he violates it?
+    Mr. Sullivan. There are some strict liability provisions
+within statute that are then implemented through rulemakings
+that do convey strict liability and criminal sanctions, yes.
+    Mr. Gowdy. Mr. Shull made a comment, and I tried to write
+it down, that there is no evidence, which is a phrase that does
+strike the attention of a former prosecutor, no evidence that
+the regulatory schemes have impacted productivity or trade in
+this country, and judging by your body language, you may have
+had a different view of that. Do you agree or disagree with his
+comment?
+    Mr. Sullivan. Congressman Gowdy, I disagree with the
+comment. We're living in a global competitive environment right
+now and we're seeing different countries trying to both protect
+the air and the land and the safety of their workers while
+minimizing further burden on manufacturers and small
+businesses, and those countries that really do try to strike
+that balance correctly end up with more employment and more
+growth and I fear that the overwhelming amount of regulations
+that do not take into account how they impact small business
+will drive businesses away from the United States.
+    So I believe it's a competitive question and the answer is
+we can't afford to simply look for evidence on a piece of paper
+that says, oh, we went too far and we're losing businesses. We
+have to act now to make sure that that doesn't happen.
+    Mr. Gowdy. Mr. Gimmel, you made the comment that the EPA
+was out of control. That was one agency that you cited with
+specificity that is out of control. Can you give me a specific
+example of that? And also, if you were to get a call from a
+regulator, the perception, because you embody small business,
+the perception that you have as a small businessman, is it one
+of we are to help you or we are here to get you?
+    Mr. Gimmel. Well, first of all, Congressman, with regard to
+the EPA, the ozone regulatory functions the EPA seems to be
+taking on, we believe, are overstepping. There's no question
+about that.
+    The second--what was the second part of your question?
+    Mr. Gowdy. Whether or not there's a perception among small
+business owners that the regulatory entities in this country
+are there to provide help or there to lay in wait to catch you
+doing something wrong?
+    Mr. Gimmel. That's more than a perception, sir. I think
+that's a reality, particularly when it comes to the new
+attitude at OSHA. Workplace injuries have been at record lows,
+historic lows for the last several years in this country
+because of, I think largely, a cooperative relationship between
+businesses and the regulatory agencies.
+    We could call them in, ask them for advice, ask them to
+take a look at part of our plant that we're reconfiguring or
+that we may have questions about and get their input without
+fear of consequences. Now, the attitude at OSHA is we're going
+to get you and you invite us in and we find something, you're
+going to get a big fine. So it's more of an adversarial
+relationship now as opposed to a cooperative relationship.
+    Mr. Gowdy. Last question. Mr. Shull, the President himself
+has acknowledged that there are regulations that have an
+unintentionally deleterious impact on job creation in industry.
+Got about 45 seconds left.
+    Can you list me four or five regulations that you would
+concede have had unintended pernicious deleterious consequences
+on industry?
+    Mr. Shull. You know, I've been waiting for the President to
+offer some specifics.
+    Mr. Gowdy. In lieu of his presence, would you give me some?
+Would you give me just a handful of regulations that you
+concede, out of the myriad of ones out there, you concede have
+had an unintendedly-pernicious impact on job creation?
+    Mr. Shull. Actually, yes. The fuel economy standards are
+set too low and have stayed too low for too long, until just
+recently, and that meant that the U.S. automakers were not
+prepared to compete when gas prices spiked and they had these
+heavy gas-guzzling SUVs----
+    Mr. Coble. Mr. Shull, I'm not buggy-whipping you but wrap
+it up, if you will, because the red light's on.
+    Mr. Shull. All right. Well, then that's one that I would
+list, in addition to the failure of the automakers to make SUVs
+that perform well in crashes. They really suffered
+significantly when the Ford Firestone debacle came to light.
+    Mr. Gowdy. Thank you, Mr. Chairman.
+    Mr. Coble. The gentleman's time has expired. The
+distinguished gentleman from Illinois, Mr. Quigley.
+    Mr. Quigley. Thank you, Mr. Chairman, and again
+congratulations on your new position.
+    Mr. Coble. Thank you.
+    Mr. Quigley. We appreciate your cordiality and
+accommodations.
+    Mr. Conyers has talked about how quickly this bill has come
+to a hearing. What's interesting, this is, I think, my fifth
+meeting already between my two Committees on the issue of
+regulations. If we could squeeze one more in this week, they
+tell me I get a set of steak knives.
+    But here's what's interesting, folks. We're basically
+saying the same things, as the Chairman said, just on either
+side of this middle ground line. We all recognize the need for
+regulation, we just want it to do a better job. I think that's
+what the President talked about and like I've said before, I
+dare anyone in this room not to think of regulation the next
+time you get on a commuter airline or if you come to my
+hometown and you drink tap water, right?
+    Chicago, not the lake water, the water from the tap which
+has levels of chromium, not healthy for you, three times what's
+been judged to be a healthy standard. So we get we're not
+perfect and it has to improve.
+    I recognize that for some, this is even more offensive
+because non-elected officials are actually part of the
+enforcement mechanisms, but we recognize that under Democratic
+and Republican Administrations, our laws and our regulations
+have always had criminal penalties to them out of absolute
+necessity, enforced by non-elected officials.
+    If you take it to its extreme, Assistant State's Attorneys
+aren't elected. Their bosses are. Well, the same is true with
+the Executive Branch, FBI agents, police officers.
+    So I think we need to recognize it's important to let the
+public know there's a balance here. If we come off that the
+only message here is that regulation is what's killing people--
+killing jobs, we forget that a lack of regulation can kill
+people. So I sense in these now five meetings that we're all
+getting sort of the same point and we have to do better. We
+have to avoid duplication and redundancy and to make the--if we
+want to get to the same goal, there might be more efficient
+ways to do that. So to the extent that we can do all that,
+that's fine.
+    I just ask that we try to use the same numbers. So when we
+talk about this, what I'm trying to get from both sides is why
+one set of figures are better than the other and why we only
+have a few minutes today, let me just ask the first because
+it's such a prominent number that's being thrown out there.
+    Mr. Shull, the Crain study threw out the biggest number so
+far, so it wins, but can you tell me, beyond what you said in
+your written documents, what you see the concerns are with that
+report?
+    Mr. Shull. So the concerns, and these are concerns, by the
+way, which have been identified by a range of folks, the Center
+for Progressive Reform on the one hand and President Bush's
+former Administrator of the Office of Information and
+Regulatory Affairs on the other hand, folks from a variety of
+viewpoints have recognized that this study and its previous
+iterations are deeply flawed. And it comes out with this number
+that is so easy to cite and memorize and use and repeat and
+understandably because it's so large, folks are going to quote
+it and be alarmed, but it seems to be the result of a garbage-
+in/garbage-out process.
+    I mean, the Crain and Crain or Crain and Hopkins or Hopkins
+studies have repeatedly used really shaky methodologies. For
+example, the key formula using the Regulatory Quality Index
+from the World Bank is based on public opinion surveys. The
+costs of environmental regulations depend in large part on a
+20-year-old study by Hahn and Hird which itself used 30-year-
+old studies produced by conservative economists to produce its
+numbers.
+    There's a really strange study by Joseph Johnson on the
+costs of occupational safety and health regulations which
+nobody can figure out quite why he did what he did and how he
+got to the numbers he got. It's a very opaque document that
+actually takes some old numbers and then multiplies them by
+5.5.
+    You know, at the core of this is a presumption that
+regulatory costs are always the same year after year after
+year, even after businesses learn how to adapt to the new
+climate and innovate and discover new ways of doing business
+that are actually far cheaper than they realize going in.
+    Mr. Quigley. Because we're running out of time, we do
+recognize there's a cost and we try to keep those to a minimum.
+What I'm trying to get both sides to do is to work with the
+same numbers. The hyperbole exists on both sides of the world
+here. So if anyone on these panels, Mr. Chairman, have the
+opportunity to submit further evidence arguing, footnoting the
+best research as possible toward their ends of what numbers we
+really should be dealing with, it's useless if we're not
+dealing with real numbers in the real world. Whatever they are,
+they're important.
+    So I'd just respect that we could work in the same ballpark
+and same universe of reality.
+    Mr. Coble. Thank the gentleman from Illinois. Thank you. I
+didn't have to cut you off that time, Mr. Shull.
+    The distinguished gentleman from New York, Mr. Reed, is
+recognized for 5 minutes.
+    Mr. Reed. Well, thank you very much, Mr. Chairman.
+    Mr. Shull, I'm trying to understand your testimony, but
+what strikes me is, you know, I listened to my colleagues on
+the other side. I listened to and reading the testimony from
+our side. I listened to the President acknowledging. Everyone
+seems to agree regulations are causing a negative impact on
+small business America, yet when I read your testimony, what
+I'm coming away with is you talk about there being a better way
+than H.R. 527 to deal with this issue, and my interpretation of
+your testimony is that it's essentially--it's a way--we should
+be increasing regulation, subsidizing small businesses to allow
+them to comply with that regulation, and then tax the people to
+pay for that subsidy for small businesses.
+    Isn't that the classic Ronald Reagan situation, you know,
+where it's essentially if it moves, tax it, if it keeps moving,
+regulate it, and then if it stops, subsidize it? I mean, do you
+agree that the regulation problem is causing the negative
+impact on small business?
+    Mr. Shull. Well, I suppose I'm afraid of the other Ronald
+Reagan problem, which is delaying regulations to the point that
+children are dying or people are at risk. I mean, for example,
+the Reagan White House delayed a simple warning label on
+aspirin products to notify parents not to give this to young
+children when they have flu or flu-like symptoms because of the
+risk of Reyes Syndrome.
+    The Reagan White House delayed that standard and in the
+course of that thousands of children were afflicted by Reyes
+Syndrome and suffered irreversible brain damage, liver damage,
+and some of them died.
+    You know, I suppose I'm also afraid of the other Reagan
+problem which is, you know, the cutting things to the bone and
+running major deficits and, you know, leaving the public at
+risk----
+    Mr. Reed. Mr. Shull, I'm not talking about Reagan's
+problem. I'm talking about your concept that what we need to do
+to cure this problem is create more regulation and then the
+people that can't comply with the regulation, let's give them a
+tax subsidy in order to allow them to comply. I guess I just
+don't see how more regulation is going to correct this
+situation.
+    Mr. Shull. Well, first of all, the subsidize concept was
+one that was jointly authored by Senator Snowe and Senator
+Kerry for legislation that would actually not subsidy small
+businesses but the small business development centers, I
+believe that's what they're called, to provide technical
+assistance to small businesses so that they can actually comply
+with the law.
+    I mean, if the challenge is that they don't know what the
+laws are and they need help learning what they are so that they
+comply, it seems to me that the solution's not to get rid of
+the law that there's to protect people, including the small
+business owners and their families, but the solution is to help
+them learn more about it.
+    Mr. Reed. That's what we hear from the government. We're
+going to take care of you.
+    Mr. Shull. Or, I mean, if they would rather hire, you know,
+private industrial hygienists or, you know, other folks to help
+them comply, I suppose that's fine. It's probably cheaper if
+they----
+    Mr. Reed. The taxpayers have to foot that bill. I mean, I
+guess I'm a small business guy. I come from a small business
+and I've just dealt with these regulations and I can just tell
+you firsthand that, you know, there's a real cost and that
+destroys businesses that otherwise could use that money to
+invest, to capitalize their markets, to move on to the next
+innovation of tomorrow, and I guess, Mr. Gimmel, I mean, you're
+a small businessman.
+    What's your response to his proposal to--where do you see
+that going?
+    Mr. Gimmel. I would ask him if he's ever run a business
+that had to comply with any of the array of regulations. I'd be
+surprised if he would make a statement like that in having a
+background of actually running a business.
+    Mr. Reed. Mr. Shull, have you ever ran a business?
+    Mr. Shull. My time has been spent in advocacy, working with
+families who've suffered incredible losses because of the lack
+of regulation.
+    Mr. Reed. And I understand that. I mean, we live in a real
+world and I understand that many people come to this table,
+come to this hall for good intentions. We don't want to hurt
+people. As the Chairman said, nobody wants--you know, we want
+clean air, we want clean water, and I think I echo my colleague
+over on the other side that said, you know, we want the
+regulations to have a good effect, but what the problem is is
+by creating more and more regulations, we're losing sight, in
+my opinion, as to what we're trying to do and all it becomes
+is, you know, guaranteeing a way to--more regulations so that
+if it's good for one situation, it must be good for all and
+that's my concern because, you know, as a small business guy
+myself, this gentleman here, people are suffering. Those are
+real jobs and those are real Americans.
+    I see that my time has expired. I'll yield back.
+    Mr. Coble. I thank the gentleman from New York.
+    I just confirmed with Mr. Cohen, Mr. Ross will be the final
+witness, final examiner, and if no one else shows, in the
+interest of your schedule, we will adjourn after we hear from
+Mr. Ross.
+    Mr. Ross, the distinguished gentleman from Florida.
+    Mr. Ross. Thank you, Mr. Chairman.
+    Mr. Sullivan, the question for you. When we talk about
+regulation for small business, I'm reminded of the Americans
+With Disabilities Act, the ADA, which has had some unintended
+consequences, but nevertheless which put a requirement on
+business for accessibility for those with disabilities, but in
+that ADA Act, it had what was known as a reasonable
+accommodation standard.
+    For example, if I was CEO of a Fortune 500 company, a
+reasonable accommodation for an employee with one type of
+disability may be something that I can afford to do with a
+modification of the workplace or access to the workplace, but
+if that same employee with that same disability came to me and
+I was an employer of four or five employees, that reasonable
+accommodation probably could not be made.
+    And so my question to you is, under the RFA, is there any
+such standard of a reasonable accommodation that would fit the
+regulatory environment to allow small businesses to meet the
+regulatory burden without having to have a broad brush approach
+for the larger ones?
+    Mr. Sullivan. Congressman, the situation that you laid out
+is exactly what H.R. 527 is trying to address because what we
+found is if agencies alone look at what constitutes reasonable
+accommodation, they may not get it right. But if they are
+forced through this law to sit down with small business owners,
+disclose what the direct impact of the proposal will be,
+disclose what the ripple effect of that proposal will be, and
+then actually listen to the input from small businesses and
+constructive ideas on how to get the regulation right, then
+that final rule that they come out with is much more likely to
+be a balance.
+    Mr. Ross. Right. And it is about a balance, isn't it?
+    Mr. Sullivan. Yes, it is about that process and that's
+really what this bill does, is it forces that process.
+    Mr. Ross. Thank you. Mr. Shull, when you talked about, in
+your opening statement, about how, if it were not for the
+regulatory environment, the auto industry thought it would not
+have had seatbelts or collapsible steering wheels, and you seem
+to indicate to me that if there not had been a regulatory
+environment, that some of the safeguards that consumers now
+enjoy would not be in place, but yet I have to look back to
+even the founding of our country when there was no regulatory
+environment and when Benjamin Franklin was one of the investors
+of the first fire insurance company.
+    In order to manage that risk, they created the first fire
+department and as we've seen throughout history that our market
+forces have allowed us to find that balance and in fact in the
+auto industry we've seen a balance because of insurance
+companies insuring a product requiring certain manufacturer
+specifications, otherwise they wouldn't insure it, otherwise
+they wouldn't give you the appropriate coverage to manage that
+risk, and so my question to you is, is that, as a businessman,
+if I were going out there and wanting to start a business and I
+wanted to make sure that I could meet the needs and have a
+profit, I would want to look at such factors, such as the
+demand, and if there was no demand out there for my product,
+then I probably shouldn't go into business, is that correct?
+    Mr. Shull. Sure.
+    Mr. Ross. And if there were no natural resources or
+whatever it was I wanted to sell, if I could not produce the
+product, even though there was a demand, it would probably be
+indicative of the fact that I shouldn't be in business, would
+that be correct?
+    Mr. Shull. Or it might be indicative of the fact that you
+haven't found the right buyers.
+    Mr. Ross. Okay. But would you go into business if you
+didn't have--I mean, if you could not make a profit at it?
+    Mr. Shull. Well, I've spent all of my time in the nonprofit
+sector, so it's not a fair question to ask me. I'm sorry.
+    Mr. Ross. Well, then, the question to ask you would be if I
+were a business that----
+    Mr. Shull. Sure.
+    Mr. Ross [continuing]. That was burdened by regulation to
+the extent that I could no longer turn a profit, is that
+indicative of the fact that maybe I shouldn't be in business at
+all?
+    Mr. Shull. Well, it might be a sign that you were under-
+capitalized to begin with or that----
+    Mr. Ross. If I was under-capitalized, would that be because
+I could not afford to comply with the regulatory environment,
+despite the demands of the consumers for my product?
+    Mr. Shull. Well, you know, this is a hypothetical, but, I
+mean, if you put this in the concrete terms, if a small
+automaker is trying to get in the business of producing
+vehicles but doesn't have the wherewithal to produce a vehicle
+that's actually safe and crashworthy on the Nation's highways,
+that's not necessarily an automaker we necessarily want in the
+business.
+    Mr. Ross. So, in other words, irrespective of the market
+forces, the regulatory forces would be a good judge of why we
+should even be in business in the first place?
+    Mr. Shull. You know, I guess I have to take issue with the
+concept that markets are conceptually and historically prior to
+government. I mean, they exist----
+    Mr. Ross. Not a bad thing.
+    Mr. Shull. Governments create markets and create the
+vehicles, the infrastructure that allow markets to flourish,
+from our roads to the fact of the legal status of corporations.
+    Mr. Ross. One--I see my time's up. I must yield back.
+    Mr. Coble. Thank the gentleman.
+    Mr. Ross. Everything's fine, and I thank you, Mr. Chairman.
+I want to just thank the panel. It was excellent and while it
+wasn't reality TV, it was good.
+    Mr. Coble. I want to thank the panel, as well. Mr. Ross,
+I'll say to you, if you had another question, we will keep this
+open. Members will have 5 legislative days to submit to the
+Chair additional written questions for the witnesses which we
+will forward and ask the witnesses to respond as promptly as
+they can so that their answers may be part of the record.
+    Without objection, all Members will have 5 legislative days
+to submit any additional materials for inclusion in the record.
+    With that again, we thank you all. As Mr. Cohen said, it's
+been a good hearing. Thank you for your contributions, and
+we're letting you all leave early, as well.
+    The Subcommittee stands adjourned.
+    [Whereupon, at 2:50 p.m., the Subcommittee was adjourned.]
+                            A P P E N D I X
+                              ----------
+               Material Submitted for the Hearing Record
+    Response to Post-Hearing Questions from Karen R. Harned, Esq.,
+Executive Director, National Federation of Independent Business, Small
+                         Business Legal Center
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                                 <all>
+</pre></body></html>

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+<html>
+<title> - GOING DARK: LAWFUL ELECTRONIC SURVEILLANCE IN THE FACE OF NEW TECHNOLOGIES</title>
+<body><pre>
+[House Hearing, 112 Congress]
+[From the U.S. Government Publishing Office]
+                              GOING DARK:
+     LAWFUL ELECTRONIC SURVEILLANCE IN THE FACE OF NEW TECHNOLOGIES
+=======================================================================
+                                HEARING
+                               BEFORE THE
+                   SUBCOMMITTEE ON CRIME, TERRORISM,
+                         AND HOMELAND SECURITY
+                                 OF THE
+                       COMMITTEE ON THE JUDICIARY
+                        HOUSE OF REPRESENTATIVES
+                      ONE HUNDRED TWELFTH CONGRESS
+                             FIRST SESSION
+                               __________
+                           FEBRUARY 17, 2011
+                               __________
+                           Serial No. 112-59
+                               __________
+         Printed for the use of the Committee on the Judiciary
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+      Available via the World Wide Web: http://judiciary.house.gov
+                                _____
+                  U.S. GOVERNMENT PRINTING OFFICE
+64-581 PDF                WASHINGTON : 2011
+-----------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
+area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC
+20402-0001
+                       COMMITTEE ON THE JUDICIARY
+                      LAMAR SMITH, Texas, Chairman
+F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
+    Wisconsin                        HOWARD L. BERMAN, California
+HOWARD COBLE, North Carolina         JERROLD NADLER, New York
+ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT,
+BOB GOODLATTE, Virginia                  Virginia
+DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
+STEVE CHABOT, Ohio                   ZOE LOFGREN, California
+DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
+MIKE PENCE, Indiana                  MAXINE WATERS, California
+J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
+STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
+TRENT FRANKS, Arizona                  Georgia
+LOUIE GOHMERT, Texas                 PEDRO PIERLUISI, Puerto Rico
+JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
+TED POE, Texas                       JUDY CHU, California
+JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
+TOM REED, New York                   LINDA T. SANCHEZ, California
+TIM GRIFFIN, Arkansas                DEBBIE WASSERMAN SCHULTZ, Florida
+TOM MARINO, Pennsylvania
+TREY GOWDY, South Carolina
+DENNIS ROSS, Florida
+SANDY ADAMS, Florida
+BEN QUAYLE, Arizona
+      Sean McLaughlin, Majority Chief of Staff and General Counsel
+       Perry Apelbaum, Minority Staff Director and Chief Counsel
+                                 ------
+        Subcommittee on Crime, Terrorism, and Homeland Security
+            F. JAMES SENSENBRENNER, Jr., Wisconsin, Chairman
+                  LOUIE GOHMERT, Texas, Vice-Chairman
+BOB GOODLATTE, Virginia              ROBERT C. ``BOBBY'' SCOTT,
+DANIEL E. LUNGREN, California        Virginia
+J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
+TED POE, Texas                       HENRY C. ``HANK'' JOHNSON, Jr.,
+JASON CHAFFETZ, Utah                   Georgia
+TIM GRIFFIN, Arkansas                PEDRO PIERLUISI, Puerto Rico
+TOM MARINO, Pennsylvania             JUDY CHU, California
+TREY GOWDY, South Carolina           TED DEUTCH, Florida
+SANDY ADAMS, Florida                 DEBBIE WASSERMAN SCHULTZ, Florida
+BEN QUAYLE, Arizona                  SHEILA JACKSON LEE, Texas
+                                     MIKE QUIGLEY, Illinois
+                     Caroline Lynch, Chief Counsel
+                     Bobby Vassar, Minority Counsel
+                            C O N T E N T S
+                              ----------
+                           FEBRUARY 17, 2011
+                                                                   Page
+                           OPENING STATEMENTS
+The Honorable Tim Griffin, a Representative in Congress from the
+  State of Arkansas, and Member, Subcommittee on Crime,
+  Terrorism, and Homeland Security...............................     1
+The Honorable Robert C. ``Bobby'' Scott, a Representative in
+  Congress from the State of Virginia, and Ranking Member,
+  Subcommittee on Crime, Terrorism, and Homeland Security........     2
+The Honorable John Conyers, Jr., a Representative in Congress
+  from the State of Michigan, and Ranking Member, Committee on
+  the Judiciary..................................................     3
+                               WITNESSES
+Valerie Caproni, General Counsel, Federal Bureau of Investigation
+  Oral Testimony.................................................     6
+  Prepared Statement.............................................     9
+Chief Mark Marshall, President, International Association of
+  Chiefs of Police
+  Oral Testimony.................................................    16
+  Prepared Statement.............................................    19
+Susan Landau, Ph.D., Radcliffe Institute for Advanced Study,
+  Harvard University
+  Oral Testimony.................................................    23
+  Prepared Statement.............................................    25
+          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
+Prepared Statement of the Honorable Henry C. ``Hank'' Johnson,
+  Jr., a Representative in Congress from the State of Georgia,
+  and Member, Subcommittee on Crime, Terrorism, and Homeland
+  Security.......................................................     4
+Prepared Statement of the American Civil Liberties Union (ACLU)
+  submitted by the Honorable Robert C. ``Bobby'' Scott, a
+  Representative in Congress from the State of Virginia, and
+  Ranking Member, Subcommittee on Crime, Terrorism, and Homeland
+  Security.......................................................    52
+                                APPENDIX
+               Material Submitted for the Hearing Record
+Prepared Statement of Joel M. Margolis, Senior Regulatory
+  Counsel, Subsentio, Inc........................................    59
+Responses to Post-Hearing Questions from Valerie Caproni, General
+  Counsel, Federal Bureau of Investigation.......................    73
+Prepared Statement of the Center for Democracy and Technology
+  (CDT)..........................................................    78
+     GOING DARK: LAWFUL ELECTRONIC SURVEILLANCE IN THE FACE OF NEW
+                              TECHNOLOGIES
+                              ----------
+                      THURSDAY, FEBRUARY 17, 2011
+              House of Representatives,
+              Subcommittee on Crime, Terrorism,
+                             and Homeland Security,
+                                Committee on the Judiciary,
+                                                    Washington, DC.
+    The Subcommittee met, pursuant to notice, at 11:23 a.m., in
+room 2141, Rayburn House Office Building, the Honorable Tim
+Griffin (acting Chairman of the Subcommittee), presiding.
+    Present: Representatives Griffin, Forbes, Gowdy, Adams,
+Quayle, Conyers, Scott, Johnson, Chu, and Quigley.
+    Staff Present: (Majority) Richard Hertling, Deputy Chief of
+Staff; Caroline Lynch, Subcommittee Chief Counsel; Arthur
+Radford Baker, Counsel; Lindsay Hamilton, Clerk; (Minority)
+Bobby Vassar, Subcommittee Chief Counsel; Joe Graupensberger,
+Counsel; and Veronica Eligan, Professional Staff Member.
+    Mr. Griffin. The Subcommittee will come to order.
+    Welcome to today's hearing on ``Going Dark: Lawful
+Electronic Surveillance in the Face of New Technologies.'' I
+would especially like to welcome our witnesses and thank you
+for joining us today.
+    I am joined today by my colleague from Virginia,
+distinguished Ranking Member of the Subcommittee, Bobby Scott.
+And I don't see the Chairman emeritus Conyers, but he may join
+us.
+    Today's hearing examines the issue of the growing gap
+between the legal authority and the technological capability to
+intercept electronic communications. This is known in law
+enforcement circles as ``going dark.''
+    Going dark is not about requiring new or expanded legal
+authorities. It is about law enforcement's inability to
+actually collect the information that a judge has authorized.
+Simply stated, the technical capabilities of law enforcement
+agencies have not kept pace with the dazzling array of new
+communication devices and other technologies that are now
+widely available in the marketplace.
+    Court-ordered electronic surveillance has long been a
+valuable tool for effective law enforcement. It is a technique
+that is used as a last resort, when other investigative
+techniques have failed or would be likely to fail or would even
+be too dangerous to try.
+    The judicial process that must be followed to seek a court
+order to authorize this type of surveillance is neither easily
+nor quickly obtained. There are many layers of review, many
+facts that must be established, and ultimately, a judge decides
+if such a technique is warranted.
+    Once authorized, law enforcement must comply with reporting
+requirements to the court that issued the order, and there are
+procedures to protect the privacy rights of innocent parties
+that may use the communication device at issue. The loss of
+this investigative technique would be a huge risk to both our
+public safety and our national security.
+    Congress initially addressed the growing gap between what
+law enforcement was legally authorized to intercept and what
+they were technically capable of intercepting by passing the
+Communications Assistance for Law Enforcement Act. By
+clarifying the obligations of the telecommunications industry,
+this act attempted to close the gap and enable law enforcement
+to address the electronic surveillance challenges presented by
+new technologies.
+    But that was back in 1994. Since then, extraordinary
+developments in communication technology have yielded new
+communication devices, new services, and new modes of
+communication that did not exist or had not fully reached their
+maximum potential when we first addressed this problem.
+    CALEA, as it currently exists, does not address the
+contemporary challenge that law enforcement agencies face when
+attempting to legally intercept electronic communications.
+    This issue is not unique to Federal agencies. But many of
+our State and local agencies may be at an even greater risk of
+going dark because many of them do not have the financial
+resources or the expertise to resolve interception problems.
+    Interception solutions are not cheap, and one size does not
+necessarily fit all. The competition in the communication
+industry has yielded a shift from standardized to proprietary
+technology. This often requires law enforcement agencies to
+develop individual interception solutions that may or may not
+work in other instances.
+    The debate on how best to modernize the law and ensure that
+our law enforcement agencies do not lose this valuable
+investigative tool will not be easily resolved. Balancing
+privacy interests, ensuring continued innovation by the
+communications industry, and securing networks from
+unauthorized interceptions must all be a part of the debate,
+and they will all need to be factored into any solution.
+    I am particularly interested in hearing about collaboration
+and information sharing among the various Federal, State, and
+local law enforcement agencies as they attempt to efficiently
+find solutions to the interception challenges.
+    I welcome our witnesses and look forward to hearing their
+testimony.
+    I now recognize for his opening statement the Ranking
+Member of the Subcommittee, Congressman Bobby Scott of
+Virginia.
+    Mr. Scott. Well, thank you very much, and thank you for
+holding this hearing.
+    I am glad to have the hearing today because over the past
+few months, there have been news reports that new
+communications technologies are making it more difficult for
+law enforcement to engage in court-authorized wiretaps. The
+same reports indicate that the Administration may be preparing
+legislation to deal with this issue.
+    All of this has led to conjecture and speculation about
+whether or not there is, in fact, a problem, what the scope of
+the problem may be, and what Congress may be asked to do about
+it. Today's hearing is constructive because we need information
+to see what is really going on.
+    Some communications companies cited in the news reports
+tell us that they have not been given any specific complaints
+about their cooperation with law enforcement, and they say they
+have yet to hear details of any reported problems. So I am
+pleased that we have two distinguished law enforcement
+witnesses here today to discuss these matters.
+    We also have a witness to testify with us today who is not
+a law enforcement representative, but an engineer with
+extensive experience in communications technology and who is an
+expert in the relationship between security and surveillance. I
+realize that this is the beginning of a discussion about a
+range of issues, which are likely to include implementation of
+the CALEA statute, as you have indicated, as well as what law
+enforcement is currently experiencing.
+    But I believe at the onset of this discussion, eyes need to
+be open to all of the considerations involved. There is no way
+around the fact that any calls for increased surveillance
+capabilities will have significant implications for
+technological and economic development, as well as basic
+privacy concerns. I am glad to hear that we will have a variety
+of perspectives on these issues from our witnesses today.
+    I want to make one last comment before concluding my
+statement, and that is that last week I attended a classified
+briefing given by the FBI including one of our witnesses today.
+And I appreciate the opportunity to hear the information that
+was presented.
+    But while I think that sometimes it is appropriate for
+Government officials to discuss classified material in closed
+sessions, particularly discussions of specific cases, it is
+critical that we discuss this issue in as public a manner as
+possible. I do not think that congressional consideration of
+these issues should rest on arguments made in secret. It would
+be ironic to tell the American people that their privacy rights
+may be jeopardized because of discussions held in secret.
+    So, Mr. Chairman, I look forward to our witnesses today,
+and thank you for Chairing the hearing.
+    Mr. Griffin. Thank you.
+    I now recognize the most recent Chairman emeritus of the
+Committee, John Conyers of Michigan, for his opening remarks.
+    Mr. Conyers. Thank you, Mr. Acting Chairman.
+    I am happy to be here today to welcome all of the
+witnesses. And to me, this is a question of building back doors
+into systems hearing, if we had to give it a nickname. And I
+believe that legislatively forcing telecommunications providers
+to build back doors into systems will actually make us less
+safe and less secure.
+    I believe further that requiring back doors in all
+communication systems by law runs counter to how the Internet
+works and may make it impossible for some companies to offer
+their services.
+    And finally, it is my belief that our communication
+companies must be allowed to innovate without technological
+constraints if they are to continue to develop products and
+services that successfully compete with foreign companies.
+    Now that I have given you my views, I would be eager to
+hear yours, and I thank you very much, Mr. Chairman.
+    Mr. Griffin. Thank you.
+    Without objection, other Members' opening statements will
+be made a part of the record.
+    [The prepared statement of Mr. Johnson follows:]
+ Prepared Statement of the Honorable Henry C. ``Hank'' Johnson, Jr., a
+   Representative in Congress from the State of Georgia, and Member,
+        Subcommittee on Crime, Terrorism, and Homeland Security
+    Good morning. I would like to thank the witnesses for being here. I
+want to begin by applauding the Chairman's efforts in seeking to arm
+law enforcement with the tools they need.
+    This hearing will largely focus on the Communications Assistance
+for Law Enforcement Act, CALEA.
+    CALEA's purpose is to enhance the ability of law enforcement and
+intelligence agencies to conduct electronic surveillance by requiring
+that telecommunications carriers and manufacturers of
+telecommunications equipment modify and design their equipment to
+ensure that they have built-in surveillance capabilities, allowing
+federal agencies to monitor communications.
+    In the wake of new technologies, law enforcement, particularly the
+FBI, has concerns about its inability to conduct court ordered
+surveillance and refers to this inability as ``Going Dark.''
+    Law enforcement would like to extend the CALEA requirement to more
+communications like Skype, encrypted BlackBerry devices, and social
+networking sites like Facebook and Twitter.
+    While it is important to arm law enforcement with the tools they
+need, we must be mindful of what such an expansion would cost the
+American people?
+    Not simply in terms of dollars and cents, but in privacy rights,
+civil liberties, our national security, innovation and global
+competitiveness?
+    In addition to sitting on the Judiciary Committee, I sit on the
+Armed Services Committee and am very concerned about how expanding
+CALEA could jeopardize national security, especially cyber security.
+    As Susan Landau states in her written testimony, we must be careful
+that the difficulties faced by law enforcement are not solved in a
+manner that puts U.S. communications at serious risk of being hacked by
+criminals, non-state actors, or other nations.
+    It is important that we move with caution when it comes to
+expanding CALEA. Legislatively forcing telecommunications providers to
+build back doors into their systems to allow for surveillance by law
+enforcement may also provide opportunities for hackers and foreign
+adversaries to gain access to these systems.
+    Legislatively expanding CALEA could create vulnerabilities in our
+communications systems that would allow cyber criminals and terrorists
+to attack us.
+    Expanding CALEA could also hurt America's competitiveness. Our
+economic growth depends in large part on the continued expansion of
+ways we use the Internet. Imposing technological constraints on
+communications companies may make it more difficult for American
+companies to develop products and services that successfully compete
+with other countries.
+    Expanding CALEA could certainly have some unintended consequences
+that would be detrimental to our country. We must keep this in mind as
+we examine this issue.
+    I look forward to hearing from our witnesses about how we can
+balance the rights of law enforcement without compromising our national
+security interests or trampling over the privacy rights of millions of
+Americans.
+    Thank you, Mr. Chairman, and I yield back the balance of my time.
+                               __________
+    Mr. Forbes. Mr. Chairman?
+    Mr. Griffin. Yes, sir?
+    Mr. Forbes. Mr. Chairman, could I just take 2 minutes for
+the Committee?
+    I just want to recognize a good friend of mine who is here
+today. We are proud of Chief Marshall. He is the president of
+the International Association of Chiefs of Police. But near and
+dear to me, he is the chief of police in Smithfield, Virginia,
+in Congressman Scott and my home State.
+    And we are proud of all of our witnesses, but particularly
+glad to see him. And I just wanted him to know that I have got
+some amendments on the floor. So I will be slipping in and out,
+but we are so glad to have you here today.
+    Thank you, Mr. Chairman. I yield back.
+    Mr. Griffin. Did he bring any hams with him? [Laughter.]
+    Mr. Forbes. Mr. Chairman, if he did, they would be the best
+hams in the world, I will tell you. [Laughter.]
+    Mr. Marshall. If it would help you with your deliberations.
+[Laughter.]
+    Mr. Griffin. It might make me go to sleep. Thank you for
+that.
+    It is now my pleasure to introduce today's witnesses.
+Valerie Caproni--is that correct?
+    Ms. Caproni. That is correct.
+    Mr. Griffin. Oh, great. Ms. Caproni has been a general
+counsel in the FBI's Office of the General Counsel since 2003.
+Prior to her work with the FBI, she was regional director of
+the Pacific Regional Office of the Securities and Exchange
+Commission. She then became a counsel at the law firm of
+Simpson, Thacher, and Bartlett, specializing in white-collar
+criminal defense and SEC enforcement actions.
+    Ms. Caproni has also previously worked in the U.S.
+Attorney's Office as an assistant U.S. attorney, chief of
+special prosecutions, and chief of the Organized Crime and
+Racketeering Section, and as chief of the Criminal Division.
+    Ms. Caproni received her bachelor of arts in psychology
+from Newcomb College of Tulane University--I am a Tulane grad
+as well--in 1976 and her law degree from the University of
+Georgia in 1979.
+    Chief Marshall is president of the International
+Association for Chiefs of Police. He has held the position of
+chief of police in Smithfield for over 18 years and has been in
+State and local law enforcement for 25 years. Chief Marshall
+serves as Chairman for the Law Enforcement Date Exchange and
+sits on the Advisory Policy Board for the FBI's CJIS Division.
+    Chief Marshall is the past president of the Hampton Roads
+Chiefs Association and is on the executive board of the
+Virginia Association of Chiefs of Police.
+    Chief Marshall received his bachelor of arts in criminology
+from St. Leo University and his master's in public
+administration from Old Dominion University. He is a graduate
+of the FBI National Academy and the Police Executive Leadership
+Program through the University of Virginia and the Virginia
+Police Chiefs Foundation.
+    Susan Landau, Dr. Landau, studies the interplay between
+privacy, cybersecurity, and public policy for Radcliffe
+Institute at Harvard University. Prior to her work at the
+Radcliffe Institute, Dr. Landau was a distinguished engineer at
+Sun Microsystems for 12 years.
+    Before her work at Sun Microsystems, she taught computer
+science at the University of Massachusetts and Wesleyan
+University. Dr. Landau is the co-author with Whitfield Diffie
+of ``Privacy on the Line: The Politics of Wiretapping and
+Encryption.'' And her book ``Surveillance or Security: The
+Risks Posed by New Wiretapping Technologies'' will be published
+this spring.
+    Dr. Landau received her bachelor of arts from Princeton
+University, her master's of science from Cornell University,
+and her Ph.D. from MIT.
+    Without objection, the witnesses' statements will appear in
+the record, put in their entirety. Each witness will be
+recognized for 5 minutes to summarize their written statement.
+    The Chair now recognizes Ms. Caproni.
+ TESTIMONY OF VALERIE CAPRONI, GENERAL COUNSEL, FEDERAL BUREAU
+                        OF INVESTIGATION
+    Ms. Caproni. Thank you.
+    Good morning, Chairman Griffin, Ranking Member Scott, and
+Members of the Subcommittee. Thank you for the opportunity to
+testify before you today regarding the problem that we refer to
+as ``going dark.''
+    Most of us are old enough to remember when the world of
+communications involved a home telephone and an office
+telephone. In that world, when a court authorized law
+enforcement to conduct a wiretap, we knew exactly where and how
+to conduct it.
+    We placed a device called a ``loop extender'' on the
+target's telephone line. That device intercepted the target's
+telephone conversations, which were then routed to our
+monitoring plant so we could hear everything said on the
+telephone and learn the telephone numbers of all incoming and
+outgoing calls.
+    Then the world of communications got a little more
+complicated. The telephone companies started to shift their
+technology from analog to digital signals, and cell phones
+became ubiquitous. The phone companies were adding services
+like call forwarding, call waiting, and three-way calling.
+    All of that had a negative impact on our ability to conduct
+authorized wiretaps, and Congress stepped into the breach. In
+1994, it passed the Communications Assistance for Law
+Enforcement, or CALEA.
+    To ensure that advances in technology would not outstrip
+law enforcement's ability to conduct court-approved wiretaps,
+CALEA required telecommunication carriers to develop and deploy
+intercept solutions in their networks so that when the
+Government gets a wiretap order, it can actually conduct the
+authorized surveillance.
+    Since then, the number of ways in which we communicate has
+exploded. We still have home office and cell telephones that
+can be forwarded, put on hold, and make three-way calls. But we
+also now have home and office email accounts, Twitter accounts,
+Facebook and MySpace pages, BlackBerrys and Androids, iPhones
+and iPads.
+    We can chat, text, and send instant messages. We can video
+chat. We can upload videos with comments, and we can
+communicate using an avatar in Second Life.
+    If all of that is not complicated enough, we can access our
+accounts from our home desktop computer via cable connection to
+the Internet or from a laptop that has a wireless connection.
+We can access our accounts from our office computer, from a
+computer in the business center of a hotel, and even from an
+iPad via a Wi-Fi hotspot while drinking no-fat latte at the
+closest Starbucks.
+    The advances in our ability to communicate have many
+advantages, but they also have made it exponentially more
+difficult for law enforcement to execute court-authorized
+wiretaps. Over the past several years, the FBI and other law
+enforcement agencies have increasingly found themselves serving
+wiretap orders on providers that are not covered by CALEA and,
+therefore, under no pre-existing legal obligation to design
+into their systems a wiretap capability.
+    Such providers may or may not have intercept capabilities
+in place for all of their services. If they have no capability
+or only limited capability, it takes time to engineer a
+solution--sometimes days, sometimes months, and sometimes
+longer.
+    Potentially critical evidence in intelligence can be lost
+while the provider designs a solution so that it can isolate to
+the exclusion of all others the communications of the
+particular person whose account we are authorized to wiretap
+and then deliver those communications and only those
+communications to law enforcement with the relevant metadata.
+    Our inability to immediately and completely execute court
+wiretap orders is not limited to new and exotic ways of
+communicating. Providers that are covered by CALEA and,
+therefore, required to maintain a solution in their systems are
+sometimes unable to immediately execute wiretaps.
+    Sometimes that happens because the company has made changes
+to its network but did not adjust its intercept solution so
+that it would still work. Sometimes the problem is that the
+approved industry standard does not provide the Government all
+the information it is lawfully authorized to collect.
+    Whatever the reason, this is a problem that creates
+national security and public safety risks. The challenge facing
+us and our State and local counterparts is exacerbated by the
+fact that there is currently no systematic way to make
+electronic intercept solutions widely available across the law
+enforcement community.
+    Federal, State, and local law enforcement agencies have
+varying degrees of technical expertise regarding electronic
+surveillance and lack an effective mechanism for sharing
+information about existing intercept capabilities. This leads
+to the inefficient use of scarce technical resources and missed
+opportunities to leverage existing solutions.
+    The absence of institutionalized ways to coordinate and
+share information in this area impedes the deployment of
+timely, cost-effective intercept capabilities that are broadly
+available to the law enforcement community. Today's technical
+advances inure to the great benefit of society, but they create
+significant challenges to the Government's ability to conduct
+lawful wiretaps.
+    We see going dark as a problem with many facets, but they
+all boil down to this. The combination of carrots and sticks
+that the Government has are not working to incentivize
+industries to develop and maintain adequate intercept solutions
+for their services.
+    As a consequence, when a court issues an order authorizing
+a wiretap, we are not consistently able to execute that order
+and promptly begin to collect evidence and intelligence. If we
+continue to be unable to accomplish that which even the most
+ardent privacy advocates will agree we ought to be able to
+accomplish--namely, to execute a wiretap order when authorized
+to do so by a court--then we will be significantly hobbled in
+achieving our mission of protecting the public safety and
+national security.
+    Thank you for the opportunity to address this Subcommittee,
+and I look forward to answering your questions.
+    [The prepared statement of Ms. Caproni follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Gowdy [presiding]. Thank you, Ms. Caproni.
+    Chief Marshall?
+         TESTIMONY OF CHIEF MARK MARSHALL, PRESIDENT,
+         INTERNATIONAL ASSOCIATION OF CHIEFS OF POLICE
+    Mr. Marshall. Good morning, Mr. Chairman and Members of the
+Subcommittee.
+    My name is Mark Marshall, and I serve as the chief of
+police in Smithfield, Virginia. I also serve as the president
+of the International Association of Chiefs of Police.
+    I am here today representing over 20,000 of IACP's members
+who are law enforcement executives in over 100 countries
+throughout the world. The majority of our membership, however,
+is here in the United States.
+    As my good friend Congressman Forbes indicated, I am from
+Hampton Roads, Virginia, a smaller jurisdiction there. I have
+the big-city problems without the big-city resources. And I
+have got 2 million people sitting on my doorstep.
+    I am pleased to be here to represent and to discuss the
+challenges currently confronting the U.S. law enforcement
+community on electronic surveillance issues.
+    In the United States, there are more than 18,000 law
+enforcement agencies and well over 800,000 officers who patrol
+our State highways and the streets of our communities each and
+every day. Very simply, in this day and age with budgets, we
+are tasked to do more with less.
+    A great number of those officers also use electronic
+surveillance as they investigate crimes. Each day, local,
+State, tribal, and Federal law enforcement agencies use lawful
+electronic surveillance as a critical tool for enforcing the
+Nation's laws and protecting the citizens we have the honor to
+serve. Moreover, electronic evidence is now a routine issue in
+all crimes and at most crime scenes.
+    The IACP believes that the lawful interception of voice and
+data communications is one of the most valuable techniques
+available to law enforcement in identifying and crippling
+criminal and terrorist organizations. Understandably, there is
+an increased volume and complexity of today's communication
+services and technologies. And the evolution and development of
+communication devices has had a significant impact on law
+enforcement's ability to be able to conduct that surveillance,
+as well as to recover valuable evidence from communication
+devices.
+    Additionally, legal mandates and authorities have not kept
+pace with the changing technology. CALEA or, the Communications
+Assistance for Law Enforcement Act, for example, does not cover
+many types of services that are, unfortunately, used routinely
+by criminals.
+    The advanced features of today's phones can process more
+information about where people have been, who they know, who
+they are calling, what they are texting, pictures they have
+sent and/or are sending, as well as larger amounts of data than
+ever before. Information recovered can also produce connections
+to other media like Facebook and Twitter, contact lists, call
+histories, calendars, waypoints, and email.
+    If properly recovered, this sort of stored data on
+communication devices has great investigative and intelligence
+value to assist law enforcement with investigations. The
+proposed center, however, does not attempt to thwart or inhibit
+social discourse, which is a fundamental piece to democratic
+societies, not attempting to water down Title III or judicial
+orders for these electronic intercepts.
+    Unfortunately, many of the agencies that need to be able to
+conduct electronic surveillance of real-time communications are
+on the verge of going dark because they are increasingly unable
+to access, intercept, collect, and process wire or electronic
+communications information when they are lawfully authorized to
+do so.
+    This serious intercept capability gap often undercuts
+State, local, and tribal law enforcement agencies' efforts to
+investigate criminal activity such as organized crime, drug-
+related offenses, child abduction, child exploitation, prison
+escape, and other threats to public safety. This must change.
+    Law enforcement must be able to effectively use lawful
+electronic surveillance to combat terrorism and fight crime.
+Law enforcement needs the Federal Government to generate a
+uniform set of standards and guidelines to assist in this
+exploration.
+    In order for law enforcement to maintain its ability to
+conduct electronic surveillance, laws must be updated to
+require companies that provide individuals with the ability to
+communicate.
+    In September, the Law Enforcement Executive Forum,
+comprised of law enforcement executives, including the IACP,
+released a plan to address the spectrum of issues related to
+electronic surveillance. This plan was the National Domestic
+Communications Assistance Center, otherwise known as NDCAC. In
+the Federal Government, we have to have lots of acronyms.
+    The proposal calls for a strategy to be created to address
+issues related to maintaining law enforcement's ability to
+conduct court-authorized electronic surveillance. The proposal
+calls on Congress and the Administration to make funding
+available to establish the center.
+    The center would leverage the research and development
+efforts of the law enforcement community with respect to lawful
+electronic surveillance capabilities. The center would also
+facilitate the sharing of technology between law enforcement
+agencies.
+    I see that my time is up. So let me just wrap this up.
+    State, local, tribal, and Federal law enforcement are doing
+all that we can to protect our communities from increasing
+crime rates and the specter of terrorism, both in our streets
+and in the many communications devices available today. But we
+cannot do it alone. We need the full support, we need the
+assistance of the Federal Government.
+    We need clear guidance and regulations on our use of lawful
+interception of voice and data communications to aid us in
+successfully investigating and prosecuting the most dangerous
+of criminals. It is important for the safety of our hometowns,
+and that will equate to the safety of our homeland.
+    Thank you.
+    [The prepared statement of Mr. Marshall follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Gowdy. Thank you, Chief.
+    Dr. Landau?
+   TESTIMONY OF SUSAN LANDAU, Ph.D., RADCLIFFE INSTITUTE FOR
+               ADVANCED STUDY, HARVARD UNIVERSITY
+    Dr. Landau. Mr. Griffin and Members of the Committee, thank
+you very much for inviting me to testify.
+    I am Susan Landau, a fellow at the Radcliffe Institute for
+Advanced Study at Harvard University. I am here representing my
+own opinions and not that of Harvard or any of the other
+institutions with which I am affiliated.
+    I have spent, for the last half dozen years and more, time
+looking at the risks involved when you build wiretapping
+capabilities into communications infrastructures. And while
+there are issues in CALEA about security versus privacy and
+security versus innovation, I am here to talk about security
+risks in building the surveillance technology in.
+    A major national security problem facing the United States
+is cyber exploitation. We have nation states and criminals
+penetrating systems, finding the files of interest, and
+downloading them quickly and shipping them out of the country.
+    This began happening in the early 2000's and has occurred
+at U.S. military sites, at Government labs, and private
+industry. Google, Lockheed Martin, NASA, Northrop Grumman, Oak
+Ridge National Labs, the list goes on.
+    How serious is the threat? According to Deputy Secretary
+William Lynn, it may be the most significant cyber threat that
+the U.S. will face over the long term. In 2003, the FBI
+reported that industrial espionage cost the U.S. $200 billion.
+It is many times higher now.
+    Can wiretapping capabilities built into communications
+infrastructures be exploited? The answer is, unfortunately,
+``yes'' because wiretapping is an architected security breach.
+    Let me tell you a story about Vodafone Greece. A CALEA-type
+switch was built into Vodafone Greece's network, built in by
+Ericsson. Vodafone Greece didn't want this switch. So it had
+been turned off. Because they didn't pay for that piece of the
+switch, they also didn't have auditing capabilities.
+    The result? A hundred senior members of the Greek
+government--including the prime minister, the head of the
+ministry of defense, the ministry of interior--were wiretapped
+for a period of 10 months until a text message went awry and
+they discovered the problem with the system.
+    At Telecom Italia over a period of 10 years, presumably
+from an insider attack, people using the system--celebrities,
+politicians, judges, sports figures--were wiretapped for a
+period of 10 years. Six thousand Italians. That is 1 in 10,000
+Italians was wiretapped. Presumably, no large business deal or
+political arrangement was ever really private.
+    A Cisco switch made to comply with law enforcement
+wiretapping standards in Europe was discovered to have
+mechanisms in it that were designed in such a way that it was
+easy to spoof the system and evade auditing. When you think
+about a wiretapping system that can evade auditing, I want to
+remind you of people like Robert Hanssen, who evaded the
+auditing systems of the FBI for many years.
+    If you think about it, when a Lockheed Martin or a Northrop
+Grumman fails to adequately secure its networks, the cost can
+be thousands of proprietary files stolen. But if a
+communications provider, an applications provider, or a switch
+provider fails to have an adequately secured communications
+system, that cost occurs over the millions of communications
+that utilize that switch or application.
+    It is unlikely that surveillance can be built in securely.
+In the U.S., there are hundreds of communications providers,
+many of them very small, with fewer than 100 employees.
+    Many startups producing new communications applications are
+similarly small. Putting wiretapping into the mix risks the
+communications of all their customers.
+    I want to step back for a moment and talk about
+cryptography, a fight we had in the 1990's in which the NSA and
+the FBI opposed the deployment of cryptography through the
+communications infrastructure. In 1999, the U.S. Government
+changed its policy.
+    The NSA has been firmly behind the change of policy, and
+endorsed a full set of unclassified algorithms to be used for
+securing the communications network. The NSA obviously believes
+that in the conflict between communications surveillance and
+communications security, we need to have communications
+security.
+    What needs to happen? I agree that law enforcement has a
+problem. Law enforcement needs to be more entrepreneurial.
+Instead of the one-size-fits-all of CALEA, it needs more
+tailored solutions.
+    It is already using transactional information. Chief
+Marshall described all of the information currently available
+on the PDAs and so on. That was not information available at
+the time that the wiretap laws were passed.
+    Transactional information is what enabled us to capture
+Khalid Sheikh Mohammed, the designer behind September 11th. It
+enabled us to capture the July 21st bomber who fled from London
+to Rome. It is what enables U.S. Marshals Service to have cut
+the time to catch fugitives from an average of 42 days to 2.
+    I think we should augment the FBI going dark effort. I know
+that is expensive in a time of financial austerity, but we are
+going to have to pay for this, and we don't want to pay for it
+by increasing security risks or threatening innovation.
+    I agree that with new communications technologies there is
+a need for law enforcement access to legally authorized
+surveillance. But let us not do it in a way that makes things
+more dangerous and unsecures the U.S.
+    Thanks very much. I would be happy to take questions.
+    [The prepared statement of Ms.. Landau follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Gowdy. Thank you.
+    Because I am merely keeping the seat warm for my
+distinguished colleague from the great State of Arkansas, Mr.
+Griffin, I would call on my equally distinguished colleague
+from the great State of Virginia, Mr. Scott.
+    Mr. Scott. Thank you.
+    Ms. Caproni, are you asking for any surveillance authority
+over and above what you have now--requirement for warrant,
+probable cause, and all of that?
+    Ms. Caproni. No, we are not. We believe that the authority
+that we have to conduct court-authorized wiretaps, which
+appears in Title III as well as in FISA, is more than adequate.
+    Mr. Scott. And when you have a wiretap and the technology
+doesn't let you listen in, that is the problem we are dealing
+with, right?
+    Ms. Caproni. Correct. We are dealing with the problem of we
+have a wiretap order. So a court has authorized us to conduct
+the surveillance. But when we serve it on the provider, the
+provider tells us they don't have the ability to isolate our
+target's communication to the exclusion of all others and
+deliver them to us in a secure manner.
+    Mr. Scott. And Chief Marshall, good to see you. As
+indicated, their recommendation that a technological way to get
+into the conversation be required to be part of cell phones or
+whatever else. Is that right, Chief Marshall?
+    Mr. Marshall. Yes, sir. I mean, there is so much--there is
+valuable data that is contained in every--most criminals are
+using their cell phone in one way, shape, fashion, or form.
+    Mr. Scott. Now, Ms. Landau, if law enforcement can get into
+a conversation, what would prevent anyone else who is a skilled
+hacker, what would be the problem for them getting in?
+    Dr. Landau. You want a tailored solution for the problem.
+So the problem with the case in Vodafone Greece is that the
+wiretapping capability was built into the switch, and it was
+easy to go in and turn the switch on instead of off. Not
+completely trivial, but easy.
+    And what you want to do, what I am proposing is that it not
+be built in in a way that decreases the security of all
+communications.
+    Mr. Scott. Well, how can the law enforcement get into a
+conversation and a skilled hacker not be able to? Can you
+construct it in such a way that only law enforcement can listen
+in and not others?
+    Dr. Landau. That is right. It used to be that you had to
+go----
+    Mr. Scott. That is right you can, or you can't?
+    Dr. Landau. You can. You can. But you can't have it done in
+a method that makes it possible to just automatically turn it
+on remotely, deliver it. You have to make it more specially
+tailored.
+    Mr. Scott. Is this hard? I mean, Chief Marshall, as he
+indicated, is from a small city. They don't have a lot of high-
+tech people sitting around. Is that something that is easy to
+put together?
+    Dr. Landau. No, it is not easy to put together, which is
+why I applaud the FBI effort to do much better information
+sharing with State and local law enforcement. I think that the
+FBI should be the one taking the lead in developing those
+capabilities, and doing that information sharing is absolutely
+crucial.
+    Mr. Scott. Now this back door would be required in
+domestically produced cell phones, for example. Could we
+require imported phones to have this same capability?
+    Dr. Landau. I don't want to see a back door. I want to see
+specially tailored capability, and those are different
+requirements. We can require what we want about systems sold
+here. The question is how they can operate here and----
+    Mr. Scott. Well, can a phone, imported phone be hacked into
+by law enforcement and not hacked into by others?
+    Dr. Landau. It depends on how you do the hacking. And that
+is really the question. If you build the system in a way that
+simplifies the hacking and makes it very easy for somebody to
+get in, and that is the problem with applying CALEA to IP-based
+communications. It is simply too easy to do that. Then you run
+into trouble.
+    Mr. Scott. Well----
+    Dr. Landau. So I am arguing for something that is more
+expensive. But you are measuring the cost of a more expensive
+tailored solution against the national security cost of risking
+communications of everybody going through that switch or that
+application being accessible.
+    Mr. Scott. If we could require this technology be placed in
+phones that are imported, we could have no ability to require
+that for phones that are manufactured outside of the United
+States and reportedly sold outside of the United States?
+    Dr. Landau. That is right. But the question is where you do
+the tapping. You could do it at the phone. You could do it at
+the switch. You can do it at many places along the pathway.
+    In the case of a cell phone, you can do it at a switch.
+That is how we do it now.
+    Mr. Scott. So if you had an out of the country phone and
+brought it into the United States, the capability would be in
+the system, not in the phone itself?
+    Dr. Landau. That is correct.
+    Mr. Scott. And American manufacturers would, therefore, not
+be at a disadvantage?
+    Dr. Landau. That is correct.
+    Mr. Scott. Mr. Chairman, I yield back.
+    Dr. Landau. But there is currently not a problem typically
+with wiretapping cell phones. The problem is with IP-based
+communications.
+    Mr. Griffin [presiding]. I recognize Mrs. Adams for 5
+minutes.
+    Mrs. Adams. Thank you, Mr. Chair.
+    Ms. Caproni, you have listened to Dr. Landau, and are you
+concerned at all about her concerns?
+    Ms. Caproni. We share some of the same concerns, and I am
+little concerned that some of the answers to the questions to
+Representative Scott may have left a misunderstanding of how we
+conduct intercepts.
+    There is no--the attacking of the device or hacking into a
+device, if we had a court order, is sometimes permitted. That
+is sometimes the best way to do it. It is not the normal way to
+conduct a wiretap.
+    We want the wiretap and the device that conducts the
+wiretap to be under the control of the provider. So, to that
+extent, I think Dr. Landau and I may actually agree that we
+don't want the intercept solution to be somewhere where it can
+be gotten to by third-party actors.
+    Mrs. Adams. Manipulated.
+    Ms. Caproni. Correct. The lawful intercept solution should
+be under the control of the provider, and the provider is
+responsible for security. There is always risk from insiders.
+That is a risk that companies manage all the time, particularly
+big communication providers. So they need to manage that risk.
+    And we will look, obviously, very hard at the issue of the
+security associated with anything that we propose to deal with
+this problem. So security is a legitimate concern. I think we
+may disagree that having a lawful intercept solution under the
+control of a provider increases that risk in any kind of a
+material way.
+    Mrs. Adams. Chief, you have heard the concerns, and I
+preface this by I will tell you I am a past law enforcement
+officer. And it did send some red flags up to me when I start
+reading the breaches and everything else and on the security
+level of it. I would like to hear your opinion.
+    Mr. Marshall. Yes, ma'am. Thank you.
+    We certainly don't want to circumvent the stringent legal
+process involved in, one, obtaining those intercepts, whether
+it is voice and/or data. Again, I think we are, particularly at
+the local and State level--you know, I represent all of law
+enforcement. The bulk of our membership is really at the local
+and State level, and it is where law enforcement actually takes
+place on a day-to-day basis in this country.
+    We need a place, particularly for the smaller and mid-sized
+agencies that don't have the capabilities to be able to go out,
+to be able to get those tools, to be able to retrieve that
+data. We need that place that we can make that call, that we
+would have that one-stop shop, if you would. That would at
+least, it may not have the information but would at least be
+able to direct us to be able to get that information.
+    In terms of, at the same time, I agree with Ms. Caproni's
+statement that it is--that I think that this is the industry or
+the provider would have that, and they would only be providing
+that when you had that lawful intercept order, that judicial
+order. For us, it is about going dark. It is most of the
+criminal element are using and exploiting the ability of the
+communication tools that are out there. They change every day.
+It is amazing to me.
+    I waited 2 years to get a Verizon phone. I finally ordered
+one. Came into the D.C. area last night, turned on the TV, and
+I found out that they have got the new generation. Generation
+5G is now going to be out in June. That is the problem. I have
+already done my order. So it is too late.
+    But that is the problem, and that is what we are seeing,
+that this is just--this changes so quickly.
+    Mrs. Adams. Technology is changing rapidly.
+    Ms. Caproni, leaving it at the provider, are you at least
+the least bit concerned that a possibility could arise, and is
+there a way to check the auditing system, if it is at the
+provider, so that we don't have a Greece or an Italy?
+    Ms. Caproni. I think the answer to that is yes, and the
+providers who provide lawful intercept to us also have
+responsibilities for the general security of their system. The
+providers are responsible for making sure that their systems
+are not being hacked into overall.
+    Mrs. Adams. Correct.
+    Ms. Caproni. As well----
+    Mrs. Adams. But are you aware if any of the systems
+currently have that switch that they just haven't turned on?
+    Ms. Caproni. I am not sure about the specific switch that
+Dr. Landau was talking about. She references two instances
+where that switch has been compromised. I would say that switch
+has been deployed to literally hundreds of thousands of
+telephone companies throughout the world.
+    So two out of hundreds of thousands, that is a balance. We
+will obviously be looking, though, at security issues.
+    Mrs. Adams. Okay.
+    Ms. Caproni. We are concerned--we would not propose
+anything to solve this problem that would appreciably change
+the security situation that exists in our telecommunication or
+the Internet system.
+    Mrs. Adams. That is what I wanted to hear. Thank you.
+    Mr. Griffin. Chairman emeritus Conyers is recognized for 5
+minutes.
+    Mr. Conyers. Thank you, Mr. Chairman.
+    To our distinguished chief of police and the president of
+the International Association of Police, you don't have much
+personal contact with these kinds of issues of cryptography
+going on, do you?
+    Mr. Marshall. No, sir. We don't have it in terms of the
+cryptography. We do, however, have the issue surrounding cell
+phones and being able to extrapolate that data because, as we
+have found, they are using--anymore it is not even about voice,
+it is also about texting. It is IM messages. It is all of those
+things.
+    Mr. Conyers. Yes.
+    Mr. Marshall. Those are pieces that we need that would
+help, would significantly help our crime-fighting capabilities.
+The unfortunate----
+    Mr. Conyers. Okay. Let me get to the point that I am
+working at. Have you had much contact or experienced problems
+with Federal or State law enforcement officials seeking to
+conduct electronic surveillance and you were stymied because
+you wanted access to encrypted information that was unavailable
+from the communications service that you were using?
+    Mr. Marshall. Yes, sir. We have, and it happens every day
+throughout the law enforcement community, an inability for us
+to be able to retrieve that data. In other words, if I seize a
+cell phone, I don't have the capabilities--as you well
+understand, I don't have the capabilities to be able to do it
+except with some off-the-shelf products that are, frankly,
+obsolete.
+    I send it to the State lab. They then have to go do the
+search to try to find the newest, the latest and greatest tool
+to be able to get that. Quite often, they come back that they
+are unable to do it. And that, unfortunately, is something that
+is happening with my law enforcement colleagues in agencies
+across this country.
+    Mr. Conyers. Dr. Landau, we have all agreed there is a
+problem here, and it is complicated. It is expensive and could
+also be very dangerous to our national security. What would
+your recommendations as first steps be in terms of dealing with
+this?
+    Dr. Landau. So I think that Ms. Caproni and I will find
+that we agree more than we disagree. I think it is imperative
+that the FBI, which is in a positive to develop solutions to
+emerging communications technologies, have a very good
+information-sharing system with State and local law enforcement
+because they clearly are overwhelmed and cannot manage that on
+their own.
+    I think transactional information, which has become much
+more valuable as emerging technologies come out, should be used
+even to greater extent than it is at present. And I think the
+research arm of the going dark program has to be expanded so
+that the FBI does the same kind of thing that the NSA does,
+finds out the emerging communications technologies and figures
+out solutions to the wiretapping before there is a case. So
+that when the case comes, they are ready with the solution.
+    And so, I think that we would find we agree quite a bit.
+    Mr. Conyers. Well, Ms. Caproni, you are here under I think
+you have come out from under the cloud that the whole Federal
+Bureau of Investigation was under the last time you were here,
+namely, that the IG had found out that you had been abusing the
+national security letters and that you promised to clean it up.
+    And my general counsel says that he feels satisfied about
+it. I don't sound like I am too satisfied about it. But you are
+here now telling us that and it is being recommended by our own
+witness that you need more resources to effect this more
+satisfactory communication with Federal and State law
+enforcement officials. Is that correct?
+    Ms. Caproni. Congressman, the FBI is always eager to have
+additional resources. Resources will help, but resources to the
+FBI standing alone is not going to solve this problem.
+    The reality is that we have ways and we know how certain
+intercepts can be done. Our technicians know how to do that.
+But these systems need to be deployed within the provider's
+system.
+    And I think from both the privacy perspective and in kind
+of real life what you want, you don't really want the FBI
+crawling around in providers' systems to install the wiretap
+solution. We want them to develop and deploy the wiretap
+solution. We think----
+    Mr. Conyers. I ask unanimous consent for one additional
+minute, Mr. Chairman.
+    Mr. Griffin. Go right ahead.
+    Mr. Conyers. Thank you very much.
+    Well, then that gets us to my back door comments when I
+started off. Do you recall that I was saying the back door way
+won't work?
+    Mr. Caproni. Congressman, I actually wrote that down, that
+you were concerned about building back doors into systems. And
+let me make one thing clear. The FBI's view is that this is not
+about back doors into systems.
+    In fact, quite the contrary. We don't want a back door.
+What we want is for the provider to isolate the transactions
+and isolate the communications that the court has authorized us
+to get and to hand those communications and no others to us
+through the front door.
+    Mr. Conyers. All right. Great.
+    Ms. Caproni. We do not want a back door----
+    Mr. Conyers. That sounds good.
+    Dr. Landau, do you agree or disagree?
+    Dr. Landau. I disagree. It is a bit of word play here. Ms.
+Caproni said, look, the Telecom Italia and the Vodafone Greece
+case were only two cases out of thousands of deployed switches.
+    If it were the President of the United States or the
+Speaker of the House instead of the prime minister of Greece,
+would we still be saying only two switches out of thousands
+deployed? Surely not.
+    When you build wiretapping capability into an application,
+when you build it into a switch, you are creating a serious
+security risk. I would say in light of the cyber exploitations
+we have been seeing nationally the last half dozen years, that
+is not a risk we can afford.
+    Mr. Conyers. Thank you very much, Mr. Chairman.
+    Mr. Griffin. Thank you.
+    The Chair recognizes Mr. Gowdy for 5 minutes.
+    Mr. Gowdy. Thank you, Mr. Chairman.
+    Ms. Caproni, to those who may misapprehend and fear that
+you are seeking an expansion of the Bureau's legal authority in
+this realm, alleviate those fears for them.
+    Ms. Caproni. I will do the best I can. We are not looking
+for any new authority. We believe that the authority that we
+have to conduct wiretaps that appears in Title III on the
+criminal side and in FISA on the national security side are
+adequate to our needs.
+    But what we are concerned is that we are losing ground to
+actually be able to gather the information that we are
+authorized to gather. For example, Dr. Landau is focusing on
+and suggests that we should rely more on transactional data.
+Transactional data is valuable. It is useful to us. It is not
+the same as the actual conversation, the content of the
+conversation, which is critically important, again, from both
+the national security and public safety perspective.
+    But I would also point out that even gathering
+transactional data, like PIN register data, which is the most
+basic information. Who is the telephone calling? Who are the
+two sides of the communication? Under the J standards that has
+been adopted by industry, under CALEA, we can't get basic PIN
+register data.
+    So while we may know that a telephone is texting, we don't
+know what the telephone number of each side of the transaction
+is. Without that very basic information, our investigations are
+stymied. We need that information in order to keep the public
+safe.
+    Mr. Gowdy. Cite for me the specific remedies you are
+seeking and Congress's authority to grant them to you.
+    Ms. Caproni. Congressman, the Administration is still
+working on what the solution would be, and we hope to have
+something that we can work with Congress on in the near future.
+    Mr. Gowdy. I take it by your title, counsel, that you are
+legally trained?
+    Ms. Caproni. I am.
+    Mr. Gowdy. No doubt better than me. So help me with the
+authority that Congress would have to, as I understand it,
+dictate to telecommunications companies changes that they have
+to make.
+    Ms. Caproni. Well, CALEA, which was enacted in 1994,
+already requires telecommunications companies to have a wiretap
+solution built into their system. There are some issues with
+CALEA and some ways that I think with the experience of 16
+years with it, it could be improved, and I think that would be
+part of--conceivably, that would be part of what we would
+recommend is how to make the CALEA process for those companies
+that it covers more productive, and it would better accomplish
+the goal that Congress created in '94.
+    As to providers that aren't covered by CALEA, I think that
+is the bigger challenge. And that is where, through the
+interagency process, there is a lot of discussion about what is
+the right way to walk the line, which is an important line,
+between having providers have the ability to execute a wiretap
+order when it is delivered to them and not squashing innovation
+and not hurting the competitiveness of U.S. companies.
+    We have a very active discussion in the interagency about
+how to walk that line. I think it is going to be something that
+Congress is going to be incredibly interested in. Is there a
+way to accomplish these two goals?
+    I am optimistic that there are ways to incentivize
+companies to have intercept solutions engineered into their
+systems that are safe and secure and not make their system more
+vulnerable to outside attacks while still encouraging the sort
+of innovation that we have seen in the American market.
+    Mr. Gowdy. Chief, let me thank you for your service and ask
+you are there specific instances that you can cite within the
+confines of an open hearing where you or members of your
+membership have had investigations thwarted because of
+inadequacies in our information-capturing systems?
+    Mr. Marshall. Thank you, Congressman.
+    I don't have specific instances. I have talked to a number
+of my colleagues around the country who indicate that this
+happens on almost a daily basis.
+    I know that we are just inundated with our case logs. We
+are also--because of the budgets, we have been forced to make
+reductions. And because of some of those case reductions, when
+we are trying to do some of these investigations, particularly
+in terms of retrieval of data that is being stored on phones or
+other electronic devices, they simply can't do it.
+    When we send it, for example, in my agency, we send it, we
+send it to the Virginia State lab, who then contacts the
+Federal partners, typically the FBI. The problem is, is they
+also have their own case log. And because of the number of
+small industry agencies or small providers that are continuing
+to pop up with the new electronic, what ends up happening is we
+get the report back that it simply can't be found.
+    And that happens every day.
+    Mr. Gowdy. Thank you, Chief.
+    Thank you, Mr. Chairman.
+    Mr. Griffin. Mr. Johnson is recognized for 5 minutes.
+    Mr. Johnson. Thank you, Mr. Chairman.
+    Law enforcement wants us to extend the CALEA requirement to
+more communications like Skype, encrypted BlackBerry devices,
+and social networking sites like Facebook and Twitter. It is
+important, I believe, that we move with caution when it comes
+to expanding CALEA, which may also provide opportunities for
+hackers and foreign adversaries to gain access to these
+systems.
+    I have a couple of questions. Number one, how big is the
+problem, Ms. Caproni, that you are trying to solve? In rough
+numbers, how many times in the last year did Federal and State
+law enforcement officials seek to conduct electronic
+surveillance and were stymied because the communications it
+wanted to access were encrypted or were unavailable from the
+communications service that carried them?
+    And secondly, as you know, governments around the world
+have recently shown a strong interest in accessing the
+communications of BlackBerry business users whose emails are
+currently encrypted with a key not known to BlackBerry's parent
+company or the wireless carrier or anyone other than the
+company employing the individual user.
+    Several countries have threatened to ban the use and sale
+of BlackBerry devices unless BlackBerry's parent company
+provides them with intercept capabilities. The ability of
+American business people to communicate securely, particularly
+when they travel abroad, is obviously of great importance to
+our own economic well-being.
+    If the emails of a U.S. businessman or woman can be
+monitored by the Saudi, Indian, or Indonesian governments when
+they travel abroad, we risk losing the intellectual property
+advantage that is at the very core of our economy. However, if
+we force BlackBerry's parent company to give U.S. law
+enforcement agencies intercept capabilities over these business
+users, it will likely be quite difficult for the company to
+keep saying no to those other governments.
+    Is providing U.S. law enforcement agencies with this access
+worth it if it means that foreign governments will then be able
+to get the same intercept capabilities in their own countries?
+    Ms. Caproni. So there are several questions in that
+question. Let me try to take them one at a time.
+    First, let me start with law enforcement or at least FBI
+has not suggested that CALEA should be expanded to cover all of
+the Internet. In fact, the subject of how you would achieve the
+goal that we are talking about is very actively being discussed
+in the interagency. That might be a solution. That might not be
+a solution. So we are not really suggesting that.
+    But let us turn directly to encryption. Encryption is a
+problem, and it is a problem that we see for certain providers.
+It is not the only problem. And if I don't communicate anything
+else today, I want to make sure that everyone understands that
+this is a multifaceted problem. And encryption is one element
+of it, but it is not the entire element.
+    There are services that are not encrypted that do not have
+an intercept solution. So it is not a problem of it being
+encrypted. It is a problem of the provider being able to
+isolate the communications and deliver them to us in a
+reasonable way so that they are usable in response to a court
+order.
+    Mr. Johnson. Well, that is not to minimize, however, the
+encryption problem.
+    Ms. Caproni. Absolutely not. But what I do want to say is,
+as we said in the written statement, that we are not looking,
+and we think this problem--there are individual encryption
+problems that have to be dealt with on an individual basis.
+    The solution to encryption that is part of CALEA, which
+says if the provider isn't encrypting the communications, and
+so they have the ability to decrypt and give them in the clear,
+then they are obligated to do that. That basic premise that
+provider-imposed encryption, that the provider can give us
+communications in the clear, they should do that.
+    We think that is the right model. No one is suggesting that
+Congress should reenter the encryption battles that were fought
+in the late '90's and talk about sequestered keys or escrowed
+keys or the like. That is not what this is all about.
+    For individuals who put encryption on their traffic, we
+understand that there would need to be some individualized
+solutions if we get a wiretap order for such persons.
+    The other thing I would note, and I thought at one point
+you were referencing the public reports that we do relative to
+how often encryption is encountered in Title III collection.
+What we find is that our agents know, for instance, that
+BlackBerrys are encrypted. So if their target is using a
+BlackBerry, they are not going to get a Title III order for
+that.
+    Title III orders, for those of you who were never AUSAs,
+Title IIIs are a lot of work to obtain. It requires an awful
+lot of work from the agent's part, a lot of work on the AUSA's
+part. They are not going to do that to get a Title III order on
+a BlackBerry that they know has encrypted traffic, and
+therefore, they would not be able to get any usable proceeds
+from that Title III.
+    So you see very low numbers in terms of the report of the
+number of times that we encounter encryption. But I think it is
+because agents, and I think Chief Marshall sort of referenced
+this, they will see a problem. And agents, rather than just
+sort of--and police officers, rather than throwing up their
+hands and saying, ``Well, I can't do it,'' they will figure out
+another way to get to where they need to go.
+    And it may not be a Title III. It may be that they will
+then approach the problem from a different direction because
+they know that a Title III is simply not going to be productive
+use of their time.
+    Mr. Johnson. Thank you.
+    Mr. Griffin. Thank you.
+    Mr. Quayle is recognized for 5 minutes.
+    Mr. Quayle. Thank you, Mr. Chairman.
+    Ms. Caproni, I want to go back to the back door issue that
+we were talking about earlier so that we can just clear up any
+misconceptions. But as you know, a lot of the public reports
+say that solving the problem that we have would create the back
+door to the Internet, where law enforcement would have the key
+to all communication systems in the U.S.
+    Is that accurate? Would the Government have direct access
+to these communication systems?
+    Ms. Caproni. No, that is not accurate. In fact, the way
+that we execute wiretaps is we go to the provider who is
+providing the communication service. We serve the order on
+them. We ask them to isolate the communications and deliver
+them to us.
+    To some extent, actually, what Dr. Landau I think is
+proposing, although it is not entirely clear, that is for the
+FBI to individually have solutions, that we then deploy the
+intercept solution throughout the Internet. That is actually a
+much less privacy protective way of doing an inception.
+    It is also not as accurate. With packet-switched
+communications, you have to collect all of the packets or you
+can't put the message back together. So there would always be
+the question of where would you deploy the device if we were
+simply deploying it in the Internet?
+    It is for that reason that we want to do the collection
+with the provider. We want to be able to serve our order on the
+provider, which then puts a third party in the mix. We serve
+our order on the provider. The provider figures out what
+account it is, isolates that account and delivers those
+communications to us and only those communications to us.
+    So there is no wiretapping of the Internet. It is really
+just our ability to serve a targeted order on a targeted
+account on a particular provider.
+    Mr. Quayle. Okay. And with those communications that the
+Government would be seeking, has a court reviewed and
+authorized you to obtain those communications? And also could
+you briefly go through that process so everybody knows how that
+is done?
+    Ms. Caproni. Absolutely. So looking at a Title III, because
+that is the authority in a criminal case, the agent and the
+AUSA have to put together an affidavit that establishes
+probable cause to believe that the target is engaged in
+particular criminal activity. They are committing felonies.
+They are using the targeted facility to commit the felony, that
+evidence will be--of the felony will be obtained if we
+intercept their communications.
+    They also have to show that other investigative techniques
+have been tried and failed or are too dangerous to use or would
+likely fail. So this is really a last-resort type of technique.
+    The court considers that. They issue an order. It lasts
+only for 30 days. During the period of that 30 days, law
+enforcement has to report back to the judge to tell the judge
+how the wiretap is going, what sort of evidence is being
+collected.
+    The wiretap itself has to be minimized. So they will do
+real-time review of the traffic that is coming in. If it is not
+evidence of a crime so that they are not authorized to keep it,
+it gets minimized. So they don't keep that information. So they
+only keep the information that is actually relevant to their
+investigation, and it is evidence of criminality.
+    Mr. Quayle. Okay. And just so we are brief, so there is no
+warrantless wiretap?
+    Ms. Caproni. Absolutely not.
+    Mr. Quayle. Okay. And a final question for Chief Marshall.
+What role does State and local law enforcement play in the
+research and development of interception solutions? Do you feel
+that State and locals have had adequate voice in this process
+to address this issue?
+    Mr. Marshall. Thank you for the question.
+    Yes, we are putting together and we actually met about a
+year and a half ago with the FBI and other Federal justice
+agencies and a significant portion represented at the State and
+local level to discuss this problem. Because at the State and
+local level, we don't have the same level of resources,
+particularly the smaller and mid-sized agencies don't have the
+same resources to be able to do these.
+    So we rely on our Federal partners to be able to do it. At
+the same time, we also know that we are increasingly seeing the
+difficulty in being able to achieve that. That was why a year
+and a half ago, when we started meeting, we ended up meeting,
+looking at the problems, particularly at the State and local
+level, and coming up with this proposal for the NDCAC.
+    And the NDCAC actually, its proposed governance--and we are
+still continuing to work some of that out--but it would have a
+significant proportion would be relegated at the State and
+local so that we have that representation, that we have that
+voice, that we have that ability to be able to share some of
+the solutions that have been developed by some of--and for the
+most part, they are usually some of the major metropolitan
+areas.
+    But we have that place that we can all put in that we would
+be able to share those best practices and strategies and also
+be able to have a voice in this problem. This is a problem for
+all of law enforcement, not just for the FBI. It is not just
+for the DEA. This is a problem whether it is a 5-member
+department or 5,000.
+    Mr. Quayle. All right. Thank you.
+    Mr. Griffin. Chairman emeritus Conyers is recognized for
+another question.
+    Mr. Conyers. Thank you very much, Mr. Chairman.
+    Dr. Landau, I would like to feel a little bit more
+comfortable with you commenting on the question of our
+colleague Mr. Quayle in terms of the back door question that he
+initially asked. Do you remember what that was?
+    Dr. Landau. If he could restate it, that would be great.
+    Mr. Griffin. We are playing musical chairs.
+    Mr. Quayle. Oh, great. What was that?
+    Dr. Landau. Restate your back door question.
+    Mr. Quayle. Okay. Basically, would the solutions to the
+problem that we are talking about actually provide a back door
+to the Internet where law enforcement could have a key to all
+communications systems in the U.S.?
+    Dr. Landau. So Ms. Caproni said that I talked about
+building the wiretapping into the fabric of the Internet, and
+certainly not. Earlier, I said that I couldn't speak for
+Harvard, and that is absolutely true. Let me point out that I
+also can't speak for the NSA.
+    The NSA has been pushing hard for communications security
+within the United States. It pushed out in 2005 a set of
+recommendations on how to secure a communications network using
+publicly available cryptography developed through the National
+Institute for Standards and Technology.
+    It is pushing that land mobile radio be available. Secure,
+interoperable land mobile radio can be purchased over the
+counter in a place like Radio Shack, and we know that it is not
+just local law enforcement and first responders who will be
+using those systems.
+    So if the NSA can function in that environment, I would
+certainly hope that the FBI can learn to function in that
+environment. I am saying that building wiretapping into a
+communications infrastructure, whether a switch or an
+application, building interception into that communications
+infrastructure is a dangerous model, whether you are Vodafone
+Greece, Telecom Italia, or the United States.
+    Thank you.
+    Mr. Conyers. Could I give, Mr. Chairman, the representative
+from the FBI the last word on this in this discussion?
+    Ms. Caproni. I am sorry. On the discussion of whether it is
+a back door?
+    Mr. Conyers. Yes. Just what Dr. Landau just commented on.
+    Ms. Caproni. I think what she is suggesting is that there
+should be security for information, and we agree with that. I
+mean, that is not--we are not suggesting that communications
+should be insecure. We are suggesting that if the provider has
+the communications in the clear and we have a wiretap order,
+that the provider should give us those communications in the
+clear.
+    But, for example, Google, for the last 9 months, has been
+encrypting all gmail. So as it travels on the Internet, it is
+encrypted. We think that is great. But we also know that Google
+has those communications in the clear, and in response to a
+wiretap order, they should give them to us in the clear.
+    Dr. Landau. No problem there.
+    Mr. Conyers. Thank you very much, Mr. Chairman.
+    Mr. Quayle [presiding]. Thank you.
+    The gentle lady from California, Ms. Chu, is recognized for
+5 minutes.
+    Ms. Chu. Thank you, Mr. Chair.
+    For Ms. Caproni and Mr. Marshall, today you have described
+difficulties in gaining assistance from companies in complying
+with lawful wiretap orders under 18 U.S.C. 2518. Title III
+orders include a requirement that all providers furnish the
+applicant forthwith all information, facilities, and technical
+assistance necessary to accomplish this interception.
+    Have you pursued contempt motions against any providers who
+have failed to comply with these lawful orders?
+    Ms. Caproni. Our approach with industry is one of
+cooperation. So we try to work with the companies to get them
+to develop a solution that will work.
+    Our sense has been that it is very difficult on the one
+hand to be cooperative and to work with a company who tells you
+we are trying, we are trying to figure out how to do this so
+that it will work and not interfere with our solution--with our
+general system, to at the same time be hauling those people
+into court. It seems to interfere with the cooperative
+relationship.
+    So, no, we have not hauled any of these providers into
+court on an order to show cause why they should not be held in
+contempt.
+    Ms. Chu. Mr. Marshall?
+    Mr. Marshall. Yes, ma'am. My answer is a little bit more
+basic. No, we have not pursued that because we typically do not
+have any direct involvement. We don't have the involvement
+directly with industry.
+    In other words, we are working through our lab or we are
+working, if it would be a Title III, it would be worked through
+our Federal partners, whether it is a task force application or
+something of that nature.
+    I will say, and I certainly I would stress this, I think
+that this has to be a partnership with industry. Industry, we
+want industry to be involved in a collaborative effort to come
+up with a solution. We understand that certainly there are
+costs involved, but a piece of this is it also has to be about
+what is good for public safety and being able to have that
+ability to be able to keep our crime-fighting capabilities at
+least up to the level that we have.
+    Ms. Chu. Ms. Landau, how do you respond to that?
+    Dr. Landau. So I am mystified in some sense by the
+discussion because while I certainly understand the going dark
+issue, and I hear the FBI and local law enforcement saying we
+are having problems, what I am not hearing are specific types
+of solutions. Ideas were floated last fall about getting rid of
+peer-to-peer and Skype, getting rid of encryption or making
+keys required to be stored.
+    And as we saw in Ms. Caproni's testimony, the written
+testimony, the FBI is no longer asking for any re-architecting
+the Internet, no longer asking at least for certain changes on
+encryption. So I am a little confused.
+    I understand that there are serious problems, and I agree
+that the new technologies sometimes do cause those problems.
+But there aren't concrete suggestions on the table. The only
+one being better research at the FBI, and I think that is
+important.
+    I want to tell a little story, which is a couple of weeks
+ago when the situation was developing in Egypt and all the
+communications were cut off with the rest of the world, all the
+Internet communications, Google sat down with Twitter over a
+weekend and developed Speak to Tweet.
+    That was a handful of engineers. You could speak into a
+call. It could be translated into a Tweet message, and that was
+a way for the Egyptians to communicate with one another. That
+is terrific.
+    I was delighted to see that innovation was happening here.
+It was happening with a handful of engineers. And that is the
+way many systems are developed in the U.S., whether you are
+talking about Google, which started with two engineers at
+Stanford, or Facebook, with a handful of people at Harvard.
+    So I don't quite understand what the FBI is pushing for,
+other than saying we are having a problem. We would like to
+augment our research arm, which I think is good. We would like
+industry to deliver things when they have it in the clear.
+    Industry, when they are capable of delivering it in the
+clear, should be delivering it in the clear. So, thank you.
+    Ms. Chu. Okay. Last question. If we do grant the FBI the
+authority it seeks, will this stop sophisticated criminals and
+terrorists from encrypting their communication, or will they
+simply start using communication tools provided by companies or
+programmers outside the U.S.?
+    And what do we do when criminals start using secure
+communication tools provided by developers associated with the
+WikiLeaks organization, who will ignore requests by U.S. law
+enforcement agencies?
+    Ms. Caproni. Thank you for that question.
+    There will always be criminals, terrorists, and spies who
+use very sophisticated means of communications that are going
+to create very specific problems for law enforcement. We
+understand that there are times when you need to design an
+individual solution for an individual target, and that is what
+those targets present.
+    We are looking for a better solution for most of our
+targets, and the reality is, I think, sometimes we want to
+think that criminals are a lot smarter than they really are.
+Criminals tend to be somewhat lazy, and a lot of times, they
+will resort to what is easy.
+    And so, long as we have a solution that will get us the
+bulk of our targets, the bulk of criminals, the bulk of
+terrorists, the bulk of spies, we will be ahead of the game. We
+can't have individual--have to design individualized solutions
+as though they were a very sophisticated target who was self-
+encrypting and putting a very difficult encryption algorithm on
+for every target we confront because not every target is using
+such sophisticated communications.
+    Ms. Chu. And Dr. Landau, any response?
+    Dr. Landau. Thank you.
+    So I am glad to hear, actually, the specific issue now of
+individualized solutions versus better solutions for bulk. And
+certainly, in some cases, and the one that Ms. Caproni
+mentioned about getting the unencrypted gmail that gmail
+obviously has at the other end or you couldn't read your gmail
+when you logged on, in that case, in that particular
+architecture, I suspect it is very easy for Google to deliver
+that mail, and I suspect it does it forthwith.
+    But we are arguing about the issue of developing
+individualized solutions for wiretapping versus creating bulk
+solutions, what the FBI calls better solutions for bulk when we
+have a national security threat of downloading and exploiting
+U.S. industry, U.S. military, U.S. national labs, U.S. civilian
+agencies.
+    And I don't think we can possibly build into the various
+communications infrastructures wiretapping solutions that will
+allow that type of bulk when it is so easy to subvert software
+and so easy to subvert IP-based solutions.
+    Thank you.
+    Mr. Quayle. The Chair recognizes the gentleman from
+Virginia, Mr. Scott, for one additional question.
+    Mr. Scott. Thank you.
+    I am a little confused. Ms. Caproni, you indicated that you
+don't want the access through the phone itself, but through the
+system, which would require--are you looking for real-time
+access or a copy of conversations?
+    Ms. Caproni. We are looking for--I am sorry. Primarily,
+what we are talking about here today is real-time interception.
+Part of what Chief Marshall has talked about is actually
+information that would not be collected in real time,
+information that is stored on your cell phone or your smart
+device, whatever.
+    But the bulk of what I have been talking about today is
+electronic surveillance. So capturing the communications in
+real time.
+    Mr. Scott. And having somebody in the industry go around
+trying to find this would take obviously someone on company
+payroll and expense. Who is paying for this expense, and how
+much is it?
+    Ms. Caproni. So we are responsible, and we are typically
+billed for the cost of electronic surveillance. So we will
+reimburse. But they have to have a solution.
+    So they have to have the ability to find----
+    Mr. Scott. But law enforcement will pay the costs of the
+finding and making access to the communication?
+    Ms. Caproni. Let me just double check, but I am pretty sure
+that is right.
+    Yes.
+    Mr. Scott. And so, that would come out of Chief Marshall's
+budget?
+    Ms. Caproni. Yes, I am sorry, Chief.
+    Mr. Scott. And does Chief Marshall have to have somebody on
+staff technologically sophisticated to figure out what to ask
+for and how to do all this?
+    Ms. Caproni. Well, that actually is an issue is different
+providers want orders to be worded slightly differently, and
+that actually is one of the things that we think the NDCAC, or
+I can't remember what, the DCAC, this center that we are
+talking about would provide. It would provide the ability to be
+a single point of contact.
+    So law enforcement, if they are doing a wiretap, let us
+say, of an RCN account that they have never done before, we
+would probably have a relationship with RCN. We would know how
+the order should be worded. We would know who in the company it
+should be served on.
+    So we would provide that intermediary so that every law
+enforcement agency in the country doesn't have to have that
+level of expertise. So it could be much more tailored, and they
+would have one-stop shopping, and we would serve as an
+intermediary or the center would serve as a useful intermediary
+between industry and law enforcement.
+    Mr. Quayle. The Chair recognizes the gentleman from
+Georgia, Mr. Johnson, for one additional question.
+    Mr. Johnson. Thank you, Mr. Chairman.
+    CALEA's purpose is to require that telecommunications
+carriers and manufacturers of telecommunications equipment
+modify and design their equipment to ensure that they have
+built-in surveillance capabilities, thus allowing Federal
+agencies to surveille in real time electronically.
+    And that calls for individualized solutions to
+communications like Skype or encrypted BlackBerry devices and
+social networking sites. Am I correct about that? Am I on
+track?
+    Ms. Caproni. CALEA doesn't cover social networking sites.
+    Mr. Johnson. Okay. All right. But as far as Skype and
+BlackBerry devices, it is applicable to?
+    Ms. Caproni. So Skype is not a U.S. company. So it is not
+covered by CALEA, or it may not be covered by CALEA because it
+is not a U.S. company. The same with REM.
+    Mr. Johnson. Okay. So non-U.S. companies would not be
+subject to any extension of CALEA. You are seeking--what are
+you seeking here today? That is really, I think, Ms. Landau's
+point, and that is my point also. What is it exactly that you
+would want Congress to do, or are you asking Congress for
+anything?
+    Ms. Caproni. Not yet.
+    Mr. Johnson. Or did we just simply invite you here to tell
+us about this?
+    Ms. Caproni. You invited me, and we came. But we don't have
+a specific request yet. We are still--the Administration is
+considering--I am really here today to talk about the problem.
+And I think if everyone understands that we have a problem,
+that is the first step, and then figuring out how we fix it is
+the second step.
+    The Administration does not yet have a proposal. It is
+something that is actively being discussed within the
+Administration, and I am optimistic that we will have a
+proposal in the near future.
+    Mr. Johnson. So you mean I have been worried for the last
+24 hours about some legislation or some issue that I could have
+worried about later, I guess? I am still worried about it.
+    Ms. Caproni. I am sorry to have put you through a sleepless
+night. I am sure we will have many others once we get a
+proposal on the table to consider.
+    Mr. Johnson. Well, I will tell you, life becomes so
+complicated that it is almost impossible to keep from worrying.
+    Thank you.
+    Ms. Caproni. I agree.
+    Mr. Quayle. I am going to recognize myself for one
+additional question.
+    Ms. Caproni, I was just curious. Do you know if the number
+of court-ordered electronic surveillance have actually gone
+down or up than the previous years? You don't have to be
+specific. But do you know if they have gone down or up?
+    Ms. Caproni. I think they are going up a little bit, and
+the raw numbers may not be as revealing as the sort of services
+that are being asked for now. So we are seeing more
+sophisticated and difficult services, like VOIP is coming up
+more and more in wiretaps.
+    I think the absolute number of wiretaps may be about the
+same or going up slightly.
+    Dr. Landau. I actually know the answer, which is that I
+believe, according to the wiretap report, it has been steadily
+increasing with perhaps a little bump down in 2009. But a quite
+steady increase.
+    What is also increasing quite substantially is the number
+of PIN register requirements, PIN registers being asked for.
+    Mr. Quayle. Thank you.
+    Well, I would like to thank our witnesses.
+    Mr. Conyers. Mr. Chairman?
+    Mr. Quayle. Yes?
+    Mr. Conyers. Before we----
+    Mr. Quayle. Another one?
+    Mr. Conyers. Yes, one final question. Is the ACLU correct
+in worrying about once we start trying to get into this
+question it is going to spin out of control, and all the things
+that may have kept Hank Johnson up last night is going to keep
+all of us up?
+    I ask Dr. Landau that because there are some up here that
+say, well, let us help the FBI out, and we will give them the
+legislation that we think they need. And there are others that
+say, well, if you do that, you are going to get something much
+worse back. And there we get into this legislative turmoil.
+    Dr. Landau. Thank you very much for the question.
+    So I really said I was going to talk about security, but I
+will take that privacy question. When you make it easy to
+wiretap, when all you have to do is flip a switch, it becomes
+much easier for privacy to be violated. So what we saw, and I
+know this is not the issue being discussed now. But what we saw
+during 2001 was a single opinion by a single relatively low
+member of the Department of Justice about warrantless
+wiretapping.
+    It was not reviewed by other members of the Department of
+Justice, and it instituted the warrantless wiretapping. So the
+point is that when you make it simple to wiretap, when you make
+it technologically simple to wiretap, it can be abused.
+    Mr. Conyers. Thank you, Mr. Chairman, for your generosity.
+    Ms. Caproni. I am sorry. May I respond to that question?
+    Mr. Quayle. Yes. Ms. Caproni, could you please respond to
+that?
+    Ms. Caproni. Representative Conyers, there are a lot of
+things that keep me up at night. One thing is the privacy of
+people who are communicating on the Internet. One is the
+security of the Internet. FBI is responsible for cyber attacks.
+We investigate them all the time. The security of the Internet
+is extremely important to the FBI.
+    But I also get kept up by worrying that we have got
+criminals running around that we can't arrest and can't
+prosecute because we can't actually execute a wiretap order.
+And that criminal may be a massive drug dealer. They may be an
+arms trafficker. They may be a child pornographer or a child
+molester.
+    Those are things, real-life things that keep us up at night
+because we need the authority--I am sorry. We have the
+authority, but we need the actual ability to conduct the
+wiretap so that we can keep the streets safe.
+    I worry about things like a Mumbai-style attack where, God
+forbid, the attackers are using communications modalities that
+we don't have an intercept solution for.
+    Mr. Conyers. So what is a little privacy invasion compared
+to all those big things that you could or are worrying about,
+right?
+    Ms. Caproni. Remember, what we are talking about is court-
+authorized wiretaps. So the privacy of people that are being
+invaded is only being invaded if an Article III judge has said
+that probable cause has been established and that the
+Government has the right to intercept these communications.
+    Mr. Quayle. Well, I would like to thank all of our
+witnesses--since we are kind of diverging off topic. I want to
+thank all of the witnesses for their testimony today.
+    And without objection, all Members will have 5 legislative
+days to submit to the Chair additional written questions for
+the witnesses, which we will forward and ask the witnesses to
+respond as promptly as they can so that their answers may be
+made part of the record.
+    Without objection, all Members will have 5 legislative days
+to submit any additional materials for inclusion in the record.
+    Mr. Scott. Mr. Chairman? Mr. Chairman? I would ask
+unanimous consent that a statement from the ACLU, the Center
+for Democracy and Technology, and other industry and privacy
+advocates be included in the record.
+    Mr. Quayle. Without objection.
+    [The information referred to follows:]
+    <GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                               __________
+    Mr. Quayle. This hearing is adjourned.
+    [Whereupon, at 12:50 p.m., the Subcommittee was adjourned.]
+                            A P P E N D I X
+                              ----------
+               Material Submitted for the Hearing Record
+<GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT>
+                                 <all>
+</pre></body></html>

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+<html>
+<title> - HEARING TO REVIEW THE VARIOUS DEFINITIONS OF RURAL APPLIED UNDER PROGRAMS OPERATED BY THE U.S. DEPARTMENT OF AGRICULTURE</title>
+<body><pre>
+[House Hearing, 112 Congress]
+[From the U.S. Government Publishing Office]
+                     HEARING TO REVIEW THE VARIOUS
+                   DEFINITIONS OF RURAL APPLIED UNDER
+        PROGRAMS OPERATED BY THE U.S. DEPARTMENT OF AGRICULTURE
+=======================================================================
+                                HEARING
+                               BEFORE THE
+    SUBCOMMITTEE ON RURAL DEVELOPMENT, RESEARCH, BIOTECHNOLOGY, AND
+                          FOREIGN AGRICULTURE
+                                 OF THE
+                        COMMITTEE ON AGRICULTURE
+                        HOUSE OF REPRESENTATIVES
+                      ONE HUNDRED TWELFTH CONGRESS
+                             FIRST SESSION
+                               __________
+                           FEBRUARY 15, 2011
+                               __________
+                            Serial No. 112-2
+          Printed for the use of the Committee on Agriculture
+                         agriculture.house.gov
+                  U.S. GOVERNMENT PRINTING OFFICE
+64-688                    WASHINGTON : 2011
+-----------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
+area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC
+20402-0001
+                        COMMITTEE ON AGRICULTURE
+                   FRANK D. LUCAS, Oklahoma, Chairman
+BOB GOODLATTE, Virginia,             COLLIN C. PETERSON, Minnesota,
+    Vice Chairman                    Ranking Minority Member
+TIMOTHY V. JOHNSON, Illinois         TIM HOLDEN, Pennsylvania
+STEVE KING, Iowa                     MIKE McINTYRE, North Carolina
+RANDY NEUGEBAUER, Texas              LEONARD L. BOSWELL, Iowa
+K. MICHAEL CONAWAY, Texas            JOE BACA, California
+JEFF FORTENBERRY, Nebraska           DENNIS A. CARDOZA, California
+JEAN SCHMIDT, Ohio                   DAVID SCOTT, Georgia
+GLENN THOMPSON, Pennsylvania         HENRY CUELLAR, Texas
+THOMAS J. ROONEY, Florida            JIM COSTA, California
+MARLIN A. STUTZMAN, Indiana          TIMOTHY J. WALZ, Minnesota
+BOB GIBBS, Ohio                      KURT SCHRADER, Oregon
+AUSTIN SCOTT, Georgia                LARRY KISSELL, North Carolina
+STEPHEN LEE FINCHER, Tennessee       WILLIAM L. OWENS, New York
+SCOTT R. TIPTON, Colorado            CHELLIE PINGREE, Maine
+STEVE SOUTHERLAND II, Florida        JOE COURTNEY, Connecticut
+ERIC A. ``RICK'' CRAWFORD, Arkansas  PETER WELCH, Vermont
+MARTHA ROBY, Alabama                 MARCIA L. FUDGE, Ohio
+TIM HUELSKAMP, Kansas                GREGORIO KILILI CAMACHO SABLAN,
+SCOTT DesJARLAIS, Tennessee          Northern Mariana Islands
+RENEE L. ELLMERS, North Carolina     TERRI A. SEWELL, Alabama
+CHRISTOPHER P. GIBSON, New York      JAMES P. McGOVERN, Massachusetts
+RANDY HULTGREN, Illinois
+VICKY HARTZLER, Missouri
+ROBERT T. SCHILLING, Illinois
+REID J. RIBBLE, Wisconsin
+                                 ______
+                           Professional Staff
+                      Nicole Scott, Staff Director
+                     Kevin J. Kramp, Chief Counsel
+                 Tamara Hinton, Communications Director
+                Robert L. Larew, Minority Staff Director
+                                 ______
+Subcommittee on Rural Development, Research, Biotechnology, and Foreign
+                              Agriculture
+                 TIMOTHY V. JOHNSON, Illinois, Chairman
+GLENN THOMPSON, Pennsylvania         JIM COSTA, California, Ranking
+MARLIN A. STUTZMAN, Indiana          Minority Member
+AUSTIN SCOTT, Georgia                HENRY CUELLAR, Texas
+RANDY HULTGREN, Illinois             PETER WELCH, Vermont
+VICKY HARTZLER, Missouri             TERRI A. SEWELL, Alabama
+ROBERT T. SCHILLING, Illinois        LARRY KISSELL, North Carolina
+                Mike Dunlap, Subcommittee Staff Director
+                                  (ii)
+                             C O N T E N T S
+                              ----------
+                                                                   Page
+Costa, Hon. Jim, a Representative in Congress from California,
+  opening statement..............................................     3
+    Prepared statement...........................................     4
+Courtney, Hon. Joe, a Representative in Congress from
+  Connecticut, submitted letter..................................   125
+Johnson, Hon. Timothy V., a Representative in Congress from
+  Illinois, opening statement....................................     1
+    Prepared statement...........................................     2
+                               Witnesses
+Cook, Cheryl, Deputy Under Secretary for Rural Development, U.S.
+  Department of Agriculture, Washington, D.C.....................     5
+    Prepared statement...........................................     7
+    Submitted questions..........................................   128
+Larson, Hon. Donald, Commissioner, Brookings County, South
+  Dakota; Chairman, Agriculture and Rural Affairs Steering
+  Committee, National Association of Counties, Brookings, SD; on
+  behalf of National Association of Development Organizations....    82
+    Prepared statement...........................................    83
+Collins, Ph.D., Timothy, Assistant Director, Illinois Institute
+  for Rural Affairs, Western Illinois University, Bushnell, IL...    87
+    Prepared statement...........................................    89
+Fluharty, Charles W., President and CEO, Rural Policy Research
+  Institute, Truman School of Public Affairs, University of
+  Missouri-Columbia, Columbia, MO................................    97
+    Prepared statement...........................................    98
+Dozier, Mike, Director, Office of Community and Economic
+  Development, California State University, Fresno, Fresno, CA...   103
+    Prepared statement...........................................   105
+                     HEARING TO REVIEW THE VARIOUS
+                   DEFINITIONS OF RURAL APPLIED UNDER
+        PROGRAMS OPERATED BY THE U.S. DEPARTMENT OF AGRICULTURE
+                              ----------
+                       TUESDAY, FEBRUARY 15, 2011
+                  House of Representatives,
+      Subcommittee on Rural Development, Research,
+            Biotechnology, and Foreign Agriculture,
+                                  Committee on Agriculture,
+                                                   Washington, D.C.
+    The Subcommittee met, pursuant to call, at 10:00 a.m., in
+Room 1300, Longworth House Office Building, Hon. Timothy V.
+Johnson [Chairman of the Subcommittee] presiding.
+    Members present: Representatives Johnson, Thompson, Scott,
+Hultgren, Schilling, Costa, Sewell, Kissell, and Courtney.
+    Staff present: Mike Dunlap, Patricia Barr, Tamara Hinton,
+Debbie Smith, Scott Kuschmider, Liz Friedlander, and Jamie
+Mitchell.
+OPENING STATEMENT OF HON. TIMOTHY V. JOHNSON, A REPRESENTATIVE
+                   IN CONGRESS FROM ILLINOIS
+    The Chairman. This hearing of the Subcommittee on Rural
+Development, Research, Biotechnology, and Foreign Agriculture
+to review the various definitions of rural applied under the
+programs operated by the USDA will now come to order. I would
+ask leave of the Committee that my opening statement be
+submitted and incorporated in the record rather than taking the
+Committee's and audience's time reading a relatively lengthy
+statement verbatim, I would ask leave of the Committee to
+submit that.
+    The statement is ordered incorporated in the record.
+    As everybody here is aware, both the Members of the
+Committee and the audience, the purpose of this bill is to deal
+with questions of rural under relative provisions of Federal
+law, in particular, the 2008 Farm Bill. There are concerns that
+have been evidenced and voiced over some period of time that
+because of too expansive a definition and/or because of failure
+of various Administration agencies to narrow in and report the
+underlying purpose of the bill, could be undermined and that
+spurring rural competitiveness in the global market through
+infrastructure, investment and business lending and assistance
+might be impaired, and that is a good part of the reason why we
+are here.
+    Let me also point out that the gentleman from Connecticut,
+my friend, Mr. Courtney, not a Member of the Subcommittee, has
+joined us today. Ranking Member, Mr. Costa, and I have
+consulted and we are pleased to welcome him to join us in the
+questioning of witnesses, unless there is any objection.
+Hearing none, leave is granted. Mr. Courtney, we are pleased to
+have you with us.
+    [The prepared statement of Mr. Johnson follows:]
+  Prepared Statement of Hon. Timothy V. Johnson, a Representative in
+                         Congress from Illinois
+    Good morning, and welcome. In the coming months this Subcommittee
+will be conducting a full review of the activities under its
+jurisdiction, including agricultural research, extension services,
+biotechnology, trade promotion, and our topic today, rural development.
+We will also be reviewing the status of programs specifically
+authorized in the 2008 Farm Bill, and how USDA has utilized these
+authorities.
+    The farm bill provided for a number of programs intended to spur
+rural economic development. Through infrastructure investments,
+business lending, and assistance for community facilities, rural
+development programs are designed with the purpose of helping our rural
+communities compete in a global market. As the agency responsible for
+implementing these programs USDA is charged with ensuring rules are
+written in a timely manner so that rural America can receive the
+greatest benefit possible.
+    Members of this Subcommittee understand that assisting small, rural
+communities carries with it a great many challenges. Not the least of
+which is ensuring that the limited funds available are targeting only
+rural communities and not diverted to urban areas.
+    While we appreciate the USDA's commitment to bringing assistance to
+rural communities, there are several areas that concern me and the
+Subcommittee that the responsibilities laid out by Congress in the 2008
+Farm Bill are not being met. Furthermore, after repeated assurances
+that adequate staff was available to complete work on rural broadband
+and loan programs, despite an influx of funds from the stimulus, I fear
+these funds have been administered to the detriment rural communities.
+I hope that USDA can provide the Subcommittee with solid evidence that
+rural America will benefit from the program before those authorities
+expire.
+    It is the purview of Congress to determine how the money entrusted
+to the Federal Government is spent, and where that money is targeted.
+Today we will be looking at a key aspect of how funds are targeted
+through the various rural development programs operated by USDA. In an
+effort to properly target communities, decision makers rely on the
+definition of `rural'. However, defining rural continues to be a
+challenge for policy makers at all levels.
+    It is our understanding that USDA has used their waiver authority
+under section 6018 of the Farm Bill to fund projects in areas the Under
+Secretary for Rural Development deemed to be `rural in character.' We
+look forward to an update on how many of the 146 eligible areas were
+awarded funds for rural development projects.
+    There are 16 Federal agencies operating 88 rural development
+programs. Virtually none of these programs have identical definitions
+of what it means to be rural. In most cases, the definitions reflect
+the specific nature of the program.
+    With so many agencies and programs targeting rural development,
+coordination is important. I hope that our witnesses today can provide
+some insight as to where greater coordination should be sought among
+the various agencies, and whether efficiencies might be gained.
+    The 2008 Farm Bill required USDA to submit a report to Congress
+that would review the various definitions of rural, describe the
+effects that the variations in those definitions have on those
+programs, make recommendations for ways to better target funds through
+rural development programs, and determine the effect of the changes to
+definitions of rural on the level of rural development funding and
+participation in those programs in each state.
+    Unfortunately, USDA has not yet completed their work due last
+summer. Today's hearing will provide an opportunity for USDA to update
+the Committee on how the revised definitions of rural have affected our
+programs. We hope that USDA will also be able to provide an assurance
+of when their report will be forthcoming.
+    We are pleased that USDA is with us this morning to give an update
+on these issues. In addition to USDA's testimony, we are pleased to
+have a panel of distinguished individuals with tremendous expertise in
+economic development. We appreciate the time and effort each of them
+has put into preparing their testimony and traveling to be with us this
+morning and we look forward to their remarks.
+    Finally, it is clearly within the jurisdiction of the Congress, the
+full Committee, and this Subcommittee to propose changes in the law
+that would better address these issues and our overarching goal of
+serving the needs of rural America. I appreciate the ongoing
+relationship with USDA and the Subcommittee on Rural Development, and
+want to work together to achieve mutual goals. However, there should be
+no question that it is the Congress, and not unelected administrative
+agencies, who will set the policy for the United States.
+    The Chairman. For his preliminary remarks I would turn the
+microphone over to my friend, the distinguished Ranking Member
+from California, Mr. Costa.
+   OPENING STATEMENT OF HON. JIM COSTA, A REPRESENTATIVE IN
+                    CONGRESS FROM CALIFORNIA
+    Mr. Costa. Thank you very much, Mr. Chairman. Good morning
+to all who are here this day, Members of the Subcommittee, on a
+bipartisan basis. I know we look forward to working together as
+we deal with many of the challenges of the subject matter that
+this Subcommittee has jurisdiction over, from rural development
+to research, biotechnology and foreign agriculture. All of us,
+in one way or another, are touched by the impacts of our
+agricultural districts. The importance of agriculture to
+America's ability not only to maintain its tremendous ability
+to feed itself, but to export our agricultural products
+throughout the world.
+    I like to say nobody does it better than we do in terms of
+food, fiber and the quality and the yield of those food and
+fibers, and also using cutting-edge technology.
+    Mr. Chairman, today's hearing is very important, and I am
+pleased that you took the time to focus on this, and to have
+our testimony from not only the USDA, but also our witnesses on
+our second panel, the focus on statutory and regulatory
+definitions of rural as they are applied to the United States
+Department of Agriculture in the various programs as to whether
+or not we qualify in our respective states as to that rural
+definition.
+    Many of us, Chairman Johnson, you and I and others, worked
+very hard on the 2008 Farm Bill to ensure that it reflected and
+represented the needs of U.S. agriculture, and on a bipartisan
+basis we did a pretty good job. It was the only bill--for the
+new Members--that actually in that Congress followed regular
+order in both Houses and actually was vetoed by the President.
+And on a bipartisan basis, we overrode the veto.
+    So, it is important to note the history of the 2008 Farm
+Bill as we focus on reauthorization in 2012. But this morning's
+hearing is very important, I believe, and I again want to thank
+you. We have many areas in the nation, take mine as an example,
+that are rural, that have tremendous agricultural production,
+that are in the top ten agricultural counties in the nation,
+agricultural counties in terms of farm output on the farm gate.
+In other words, they are what we count in terms of gross
+receipts. My counties, Fresno County, and Kern County have been
+number one and number three, respectively, for decades. Fresno
+County is the largest agricultural county in the nation. Kern
+County is number three. Tulare County represented by
+Congressman Nunes is number two, the largest dairy county in
+the nation, yet none of those counties in the whole region
+qualify under the rural definition.
+    I would love to invite you. I know my other colleagues
+would love to invite you to the San Joaquin Valley, the
+heartland of California's farm breadbasket. We don't fit under
+the rural definitions, and I would submit to you that having
+farmed there myself and my family for 3 decades, we are pretty
+rural, yet under the USDA's definitions we don't qualify. And
+it is like our tax dollars come here to Washington, but they
+don't come back to the areas I represent. You will see the maps
+and our witnesses will demonstrate that in their testimony,
+there are a host of areas throughout the United States that
+fall in that same category.
+    I don't know if it is possible to establish a nationwide
+definition for rural as we continue to deal with the
+challenges, not only like mine, but elsewhere in the country.
+But, I think everyone here, the USDA included, would be hard-
+pressed to come up with a singular definition as to what it
+means to be rural in each state in the nation.
+    So I am looking forward to the testimony, Mr. Chairman, as
+we wrestle with this effort, as we try to ensure that our
+communities throughout the country are able to participate in
+the farm bill as we hoped and intended it to be when we passed
+it on a bipartisan basis in 2008.
+    So I thank you, and I look forward to listening to the
+testimony and I will submit the rest of my comments for the
+record.
+    [The prepared statement of Mr. Costa follows:]
+Prepared Statement of Hon. Jim Costa, a Representative in Congress from
+                               California
+    Good morning, Chairman Johnson. Thank you for calling today's
+hearing and I congratulate you on being named Chairman to this
+Subcommittee for the 112th Congress. I look forward to working with you
+and all the Members on both sides of the aisle on the many issues under
+our jurisdiction. I am proud of what this Committee has accomplished in
+a bipartisan fashion during my time in Congress and I hope we can
+continue down that road for the next 2 years.
+    Today's hearing is an important one, because the various statutory
+and regulatory definitions of `rural' applied to USDA Rural Development
+programs have a significant effect on rural communities in my district
+and home state. California continues to struggle with eligibility for
+these programs, whether it is rural housing, health, or essential
+community facilities, largely because of the criteria used to define
+rural communities.
+    The use of rural definitions as basic eligibility criteria has
+created a separate set of problems. On the one hand, the establishment
+of different criteria for what is rural depending on the program has
+created a great deal of confusion, even among economic development
+professionals who in many cases are familiar with RD programs.
+    Another problem is the nationwide application of a given rural
+definition. I think everyone here, USDA included, would be hard-pressed
+to come up with a singular definition that accurately portrays what it
+means to be rural in each and every state. Unfortunately, these
+definitions do apply and often exclude communities and their residents
+from financing essential infrastructure like housing, basic utilities,
+and health facilities.
+    Definitions based on population or distances from urbanized areas
+also do not take into account other socioeconomic factors that could
+elevate communities to be ideal candidates for RD programs. Migration
+flows have caused some cities to grow above the population cutoff
+without the accompanying increased economic development and diversified
+economies that many people associate with urban areas. But they are
+rapidly losing their eligibility for rural programs that aim to meet
+these goals. The Central Valley of California has seen this play out
+time and time again.
+    Recent farm bills have made tweaks to the definition of rural, so I
+look forward to hearing from both panels on whether or not a new
+approach is needed. It's no secret that Rural Development is under the
+budget microscope, even with nearly all of their programs being
+oversubscribed. If more rural communities can be better served with a
+different set of criteria or a different regionally-based approach to
+development, then that is something this Committee should consider for
+the next farm bill. I hope USDA will be able to provide this Committee
+with some suggestions from the lessons it has learned from the
+administration of awards not just in annual appropriations, but the
+Recovery Act funds to certain RD programs that aimed to bolster
+essential infrastructure.
+    Once again, I welcome today's witnesses and I look forward to their
+testimony. I yield back my time.
+    The Chairman. Thank you, Mr. Costa. I would like to remind
+Members that after at the conclusion of each panel, that they
+will be recognized for questioning in the order of seniority
+for Members who were here at the start of the meeting. That is
+fairly traditional and common in each Committee. After that,
+Members will be recognized in order of arrival. I appreciate
+your understanding and the clerk will be supplying me that list
+as we progress through the testimony.
+    Our first panel consists of one member. I would like to
+welcome our first witness to the table, specifically Ms. Cheryl
+Cook, Deputy Under Secretary for Rural Development, U.S.
+Department of Agriculture, in Washington. Ms. Cook, please
+begin when you are ready. I don't want to preempt in any way
+what you choose to do. If you want to summarize from your
+statement, which we have in full, we would be more than happy
+to give you more time to actually respond to questions and
+articulate the points you want to make, but that is entirely up
+to you. Proceed.
+  STATEMENT OF CHERYL COOK, DEPUTY UNDER SECRETARY FOR RURAL
+                DEVELOPMENT, U.S. DEPARTMENT OF
+                 AGRICULTURE, WASHINGTON, D.C.
+    Ms. Cook. Thank you, Mr. Chairman. Good morning to you and
+to Ranking Member Costa, and to other Members of the
+Subcommittee. It is my pleasure to be here today to discuss the
+issue that perhaps more than any other caused me to leave a
+perfectly good job in the Pennsylvania Department of
+Agriculture that I enjoyed very much to come back to USDA. We
+simply have to do something about how we account for rural
+resources. In the interest of time, I would like to just submit
+my statement for the record, make a few brief opening comments
+and get right to your questions.
+    My written statement includes a complete listing of all of
+our statutory definitions with respect to what is an eligible
+rural area. While there are variations among them, one thing
+they have in common is that they serve as a basic test of
+eligibility. They are gates, if you will. If you don't meet the
+standard, we don't even take your application; a gate does not
+open.
+    The other thing our several eligibility standards have in
+common is that they rely almost entirely on the total
+population as the definition of rural. That leaves out other
+obvious characteristics of a rural area compared to a
+metropolitan area, including some that might be of use to this
+Committee as well as to USDA in targeting resources to the
+areas of greatest need and best opportunity.
+    Every state and territory has areas that are more rural
+than others, certainly based on total population, but also
+based on other factors like population density, the presence of
+natural assets like lakes and forests, whether zoning exists
+and the types of land uses that are authorized in that zoning,
+the prominence of production agriculture, as Congressman Costa
+was explaining, and the role that agriculture plays in the
+local domestic product and its workforce.
+    There are many, many definitions, among them, whether the
+community is large enough to get its own share of Community
+Development Block Grant funds from HUD, or Community Services
+Block Grant funds from HHS.
+    Once that basic eligibility is determined, though, and the
+gate opens, both our several statutes and agency regulations do
+provide additional tools to USDA Rural Development staff for
+targeting resources, particularly grant funds to communities
+that have the smallest population and the lowest median income.
+    USDA's Economic Research Service has done extensive work on
+how to best target resources to rural areas. And I am pleased
+to tell you that tomorrow they will be releasing an interactive
+atlas online that will give all of us a handy tool for mapping
+the characteristics that I have described, and others, that can
+help us all literally see where rural America is. As the new
+Census rolls out, that becomes more important. I am sure ERS
+would be happy to come do a demonstration of their new atlas
+tool for Subcommittee Members and staff.
+    The need to apply a single nationwide standard in each
+program, along with the variety of standards that exist under
+current law--everything from 10,000 in the case of the Water
+and Waste Disposal program, to no rural area requirement at all
+in some other cases--has been challenging for Rural Development
+staff and exasperating for our customers.
+    I can give you examples of these challenges from my past
+life as State Director for Rural Development in Pennsylvania. I
+also know many of you can, and some of you already have, given
+me examples that you are dealing with every day as your
+constituents call you in frustration.
+    In addition, it would appear that Congress has some
+frustration around this too. In 2008, the farm bill did give us
+some authority for what is called the ``rural in character''
+exception to recognize that rapidly urbanizing areas may still
+contain pockets of communities that are essentially still rural
+in character. This is a start in flexibility but doesn't quite
+do the whole job.
+    In addition, every year, Members of Congress add general
+provisions to our appropriations law declaring that for
+whatever program a certain community that is otherwise not
+eligible, because its population is over that single nationwide
+standard, is nonetheless deemed to be rural until the next
+decennial Census comes out. Of course, that is going to happen
+between now and when Congress writes the next farm bill. And so
+we are going to have communities that think they are safe,
+because they have had a general provision that no longer will
+be in effect. We will also have communities as the Census data
+rolls out that have been eligible and won't be anymore.
+    And finally, we will have some communities that have not
+been eligible, but due to population loss, will become so. I am
+reminded of the 2000 Census. The City of Harrisburg, which is
+the state capital of Pennsylvania, dipped below 50,000
+population, and for the first time became eligible for the
+Business and Industry Loan Guarantee program. This opened up
+the whole of south central Pennsylvania to that program for the
+first time.
+    We are often asked in Rural Development, why do you have
+housing and business and energy programs? Why do you do health
+clinics? There are whole departments of the Federal Government
+that do these things, so why do you do them too? And the answer
+we give is that Rural Development has a unique role in the
+Federal family. We alone have the field structure, 47 state
+offices, 500 area offices where our staff can work shoulder to
+shoulder with rural communities to help them identify all of
+the resources that are out there, ours and other agencies, get
+them through the application process and help them succeed.
+    Rural Development also plays a somewhat unique role within
+USDA. We are not unmindful that we do what we do within the
+Department of Agriculture. I want to congratulate my fellow
+Pennsylvanian Congressman Thompson for his Subcommittee
+chairmanship on the conservation side.
+    The definition we have for eligible rural area in business
+programs includes every place except communities greater than
+50,000 and adjacent urbanized areas. What that does is drive us
+out of the adjacent urbanized areas into open space and farm
+land. In states that have been experiencing rapid sprawl----
+    The Chairman. If the gentlelady could bring your remarks to
+a close, our time has expired.
+    Ms. Cook. Sure. I would be happy to do that.
+    For states that have experienced urban sprawl, that makes
+it particularly challenging to balance the priorities of USDA.
+    Finally, Mr. Chairman, there are a few instances in which
+current law does provide the ability to go into urban areas
+quite directly. That includes the energy title of the farm
+bill, it includes programs that can benefit food deserts, and
+it include renewable energy from the Rural Utilities Service
+both in rural and non-rural areas.
+    And with that, I will stop and address any questions you
+have.
+    [The prepared statement of Ms. Cook follows:]
+  Prepared Statement of Cheryl Cook, Deputy Under Secretary for Rural
+     Development, U.S. Department of Agriculture, Washington, D.C.
+    Chairman Johnson, Ranking Member Costa and Members of Subcommittee,
+it is my pleasure to be with you today to discuss one of the most
+fundamental, and vexing questions we face in USDA Rural Development--
+how ``rural'' is defined, and what role rurality should play in how we
+function on behalf of the U.S. Department of Agriculture.
+    These are fundamental questions for USDA , as we exist to provide
+economic and community development to overcome obstacles based on
+rurality. Rural areas have experienced economic stress from long-term
+poverty and decades of population decline. Federal assistance from USDA
+is essential to these communities as they often don't have access to
+private capital markets and have limited access to assistance from
+other departments in the Federal Government. Moreover, they do not have
+the total population to support repayment of a bond to finance critical
+infrastructure needs or their population is so widespread that such a
+system would be prohibitively expensive.
+    These questions are vexing because, under current law, rurality is
+used to determine a project's basic eligibility for most of our
+programs and is defined almost solely in terms of total population
+thresholds. As a result, a single standard for program eligibility is
+applied equally in New Jersey and New Mexico, in Alabama and Alaska, in
+Virginia and the Virgin Islands. Given that each state has the right to
+determine its own municipal structures, a single standard that may
+sound simple in theory can be difficult to apply in practice. For
+example, Congress added language in the 2002 Farm Bill limiting the
+universe of eligible applicants for the Water and Waste Disposal
+program of Rural Utilities Service (RUS) and the Community Facilities
+program of Rural Housing Service (RHS) to ``cities, towns, and
+unincorporated areas'' whose populations did not exceed the previously
+established population limits. Such language does not properly account
+for the variety of local forms of government including townships,
+boroughs, and other municipalities that in many states describe the
+very less-populated municipalities those programs are intended to
+reach. It also overlooks some of the structural uniqueness of several
+of the original colonies--in the role of a town and the status of a
+village, for example--dating back to the original Plymouth settlement
+in the 17th Century.
+    Further, relying almost solely on total population as the
+definition of rural leaves out other obvious characteristics of a rural
+area compared to a metropolitan area. Those characteristics might help
+direct USDA Rural Development's resources to areas of greatest need and
+opportunity. Every state and territory have areas that are more rural
+than others, certainly based on total population, but also based on
+other factors such as population density, the presence of natural
+assets like lakes and forests, zoning regulations and land uses that
+might be covered in local ordinances, the prevalence of production
+agriculture and its infrastructure in the area's gross domestic product
+and workforce, whether a community qualifies for its own share of
+Community Development Block Grant funds from the Department of Housing
+and Urban Development or Community Services Block Grant funds from the
+Department of Health and Human Services or has to compete for some of
+the remainder after urban centers have taken their share, and so forth.
+USDA's Economic Research Service (ERS) has done extensive work on
+rurality, as have the other witnesses you will hear from today. Much of
+ERS' work is available on-line through virtual briefing rooms found at
+http://www.ers.usda.gov/Briefing/. ERS also is about to release a new
+interactive atlas looking at many characteristics of rural areas. I
+believe it will be a very useful tool for Congress, USDA, and our
+private sector partners in rural economic and community development.
+Mr. Chairman, I'm sure that my colleagues in ERS would gladly do a
+demonstration of the new atlas for Subcommittee Members and staff.
+    Applying a single standard to determine rural eligibility along
+with the variety of standards that exist in current law has been
+challenging for Rural Development staff and exasperating for applicants
+and lenders.
+    Apparently, it also has been a source of frustration for Members of
+Congress. In recognition of the problems created by the rural area
+definitions, the 2008 Farm Bill provided the Under Secretary with
+limited authority to determine areas that do not meet the rural area
+definition as ``rural in character'' and thus an eligible rural area.
+While helpful, this authority has proven far too limited to fix the
+problems with the current definitions of rural area. In addition, each
+year Congress adds a series of general provisions to the agriculture
+appropriations legislation declaring that a certain municipality is
+deemed to be rural even though its population exceeds the statutory
+eligibility standard for that program.
+    Given that those general provisions largely expire with the release
+of new decennial Census data, the timing of today's hearing is even
+more important. Many communities that have been eligible by reason of a
+general provision will not be after the new 2010 Census data is
+released. Further, the Census data will show that other communities no
+longer are eligible rural areas for certain programs, while still
+others that have experienced population loss might become eligible for
+the first time in decades. Now is an incredibly important time to
+review rurality and begin determining the best way to achieve our
+shared objectives of helping to create economic opportunities for rural
+citizens and helping them improve their quality of life. Mr. Chairman,
+I congratulate you and the other Members of the Committee for digging
+into these questions now.
+    USDA Rural Development administers over 40 different programs
+through its three agencies--Rural Utilities Service, Rural Housing
+Service, and Rural Business-Cooperative Service--delivered through 47
+Rural Development state offices and nearly 500 area offices. These
+programs were authorized by several different laws. A complete set of
+all of our statutory ``rural area'' definitions is attached to my
+testimony as Appendix 1. I would like to focus the balance of my
+testimony today on three of those laws: the Consolidated Farm and Rural
+Development Act, or CONACT; the Rural Electrification Act; and the Farm
+Security and Rural Investment Act, which was amended by the Energy
+title of the 2008 Farm Bill.
+    Section 343(a)(13) of the CONACT defines ``rural'' and ``rural
+area'' for programs of USDA Rural Development authorized therein,
+principally business programs and community-based programs. In general,
+the Act provides a definition of ``rural'' or ``rural area'' that is,
+``any area other than--(i) a city or town that has a population of
+greater than 50,000 inhabitants; and (ii) any urbanized area contiguous
+and adjacent to a city or town described in clause (i)''. This
+definition would act as a default definition for new CONACT programs,
+and is historically the definition applied to the business programs of
+Rural Business-Cooperative Service (RBCS).
+    The CONACT provides separate definitions for two additional program
+areas. For the Water and Waste Disposal direct loans, guaranteed loans,
+and grants of Rural Utilities Service, the Act defines ``rural'' and
+``rural area'' as a, ``city, town, or unincorporated area that has a
+population of not more than 10,000 inhabitants''. For the Community
+Facilities direct loans, loan guarantees, and grants of Rural Housing
+Service, the Act defines ``rural'' and ``rural area'' as a, ``city,
+town, or unincorporated area that has a population of not more than
+20,000 inhabitants''.
+    The Rural Electrification Act's definition of eligible ``rural
+area'' for Rural Utilities Service's electric loan and loan guarantee
+programs was changed in the 2008 Farm Bill from ``any area of the
+United States not included within the boundaries of any city, village,
+or borough having a population exceeding 1,500'', to instead align with
+the Community Facilities program definition in Rural Housing Service,
+i.e., municipalities with a total population not more than 20,000.
+However, those Rural Electric Cooperatives which still had an
+outstanding loan with RUS at the time and had been eligible under the
+prior definition retained their eligibility--once rural, always rural.
+    With the exception of Section 9007, the Rural Energy for America
+Program, the portions of Title IX of Farm Security and Rural Investment
+Act of 2002 assigned to Rural Development do not have a statutory
+requirement that projects be financed in a rural area. Proposed rules
+nonetheless including a ``rural area'' eligibility requirement
+comparable to other business programs were published by Rural Business-
+Cooperative Service (RBCS) for the Biorefinery Assistance Program (
+9003), the Repowering Assistance Program ( 9004), and the Bioenergy
+Program for Advanced Biofuels ( 9005) on April 16, 2010 with a 60 day
+public comment period. Our intent was to have these programs mirror
+other types of business financing programs available from RBCS. Interim
+final rules for all three programs have been published.
+    Rural Development staff administering these loans, loan guarantees,
+and grants must
+</pre></body></html>

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