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Soft-boiled regs.

Back in the days when the Occupational Safety and Health Administration (OSHA) kept itself busy by drafting directives specifying the height of the nation's fire extinguishers and the width of its toilet seats, it was easy for voters to be taken in when Ronald Reagan bemoaned the total cost of all federal regulation - "all waste," as he once put it, "due to regulatory overkill." It was easy for them to chuckle when he took a lighter tack: "If the federal government had been around when the Creator was putting his hand to this state, Indiana wouldn't be here. It'd still be waiting for an environmental impact statement."

These days, though, it's hard to live with the consequences. Maybe fire extinguishers come in all shapes and sizes, but so do the tumors in kids who grow up near areas like the Brio refining site in Texas, where Reagan's Environmental Protection Agency (EPA), less interested in freeing the hand of the Creator than that of big business, settled for a face-lift rather than an aggressive cleanup of toxic wastes left by corporate polluters. In the late eighties, outrage over failures like Brio and the $500 billion S&L collapse revealed that Americans have a slightly more complicated view of regulation than Reagan may have thought: They might have wanted government off their own backs, but they sure as hell wanted it to stay on the backs of those who might steal their savings, wreck their health, or maim their kids.

In fact, it's astounding in retrospect that voters let Reagan get away with attacking all regulation, as though one could simply wipe the books clean. You don't have to be Ralph Nader to understand that people need rules. Just as laws define the bounds of society (you can't shoot your enemies), regulations define the bounds of the marketplace (you can't sell nuclear bombs). And just as police are supposed to nab criminals, regulators are supposed to nail violators of market rules.

In practice, these theoretical distinctions become meaningless. Whether you kill somebody by driving recklessly or by marketing a deadly drug, you should wind up in prison just the same. Somehow, though, as we all got tough on crime in the eighties, cops became pop culture heroes while regulators became pests - until one day Americans looked up and realized the Charles Keatings had eaten our lunch.

Maybe this explains why, when federal marshals seized 2,000 crates of Citrus Hill Fresh Choice orange juice, the crackdown was such big news, hyped by the networks and The New York Times. But while the administration has come down hard on the orange juice menace and gotten great publicity as a result, it is quietly letting much greater hazards go unchecked. Yes, there have been some tentative steps toward reregulation. The National Highway Traffic Safety Administration has accelerated the implementation of rules to make light vans and trucks safer. OSHA and the EPA have taken more enforcement actions against the most blatant corporate crooks. The Federal Trade Commission is looking into business mergers more carefully. And the Food and Drug Administration (FDA) has finally cracked down on the generic drug industry.

But such accomplishments have been piecemeal, lacking central direction. As Newsweek reported last year, after reading newspaper accounts of business fears over a possible new regulatory crackdown, Bush sent a note to John Sununu: What's going on? The free-market ideologues in the White House - in particular Sununu and Dan Quayle, operating through his Council on Competitiveness - have tried hard to undercut any push in the ranks toward reregulation. Indeed, the vaunted orange juice assault itself was less the result of regulators' concern for little kids than of a concerted lobbying effort by Citrus Hill's competitors. A look at some of the other deeds behind the words of this administration reveals that, when it comes to regulation in the Bush era, it's pretty much business as usual. The result is a growing threat to public health on numerous fronts, from poison in our food to hazardous wastes on the railways to plain old pollution in the air and water.


The numbers alone provide telling insight into the decayed state of America's regulatory infrastructure. Despite the fact that the crisis in the commercial banks has become front-page news, each Federal Deposit Insurance Corporation examiner is, on average, responsible for ensuring the sanctity of one billion dollars in Americans' savings. At the Federal Election Commission during the 1990 elections, 23 weary analysts were responsible for spotting any shenanigans in 55,000 10-page campaign finance reports. And a grand total of 300 federal watchdogs guard the $2 trillion held in 730,000 pension plans nationwide - the nest eggs of some 56 million Americans. But numbers give only part of the story. The most important question is not how many regulators there are, but what those regulators are doing. The answer is that in many vital areas, they're doing nothing at all.

Consider the federal government's record on regulating toxic chemicals and pesticides, which end up in food and groundwater. The statistics are frightening. Out of the hundreds of pesticides and other chemicals used, only a handful - fewer than 10 - have ever even been reviewed. Although the food industry usually tries to block any such legislation, Congress managed to order the EPA to check all pesticides and chemicals first in 1972 and again in 1988. The EPA simply never complied. These unchecked chemicals remain on the market, and the dangers they may pose remain an open question.

Even when the hazards of a pesticide are well documented, the Bush administration has proven less than zealous in restricting its use. The case of parathion provides a good example. On the market since the late forties, parathion was originally developed by the Nazis as a weapon in World War II and subsequently put to use killing bugs on plants. It has long been known to cause chronic neurological and behavioral problems - oh, and kill people, too. Under fire from Congress, migrant worker advocates, and farm groups, the EPA finally restricted it. Sort of.

EPA regulators bragged about the breadth of the ban, whereby the pesticide industry agreed to discontinue 80 percent of parathion's uses. But the EPA didn't bother to mention that 80 percent of the uses of parathion only constitutes 25 to 50 percent, max, of the volume.

The Mumbles fumble

Scratch an eighties regulatory failure and you generally discover that it was based on trusting the industry involved to police itself. For example, recall the train derailment and chemical spill that poisoned 45 miles of the Sacramento River in northern California last July. The nastiest agent unleashed in the spill was metam-sodium, a pesticide applied to soil before seeds are planted to strip away weeds, insects, and microbes. When mixed with water, metam-sodium produces hydrogen sulfide gas and other dangerous compounds. But because the EPA does not classify metam-sodium as a hazardous material, neither does the Department of Transportation. The result in this case was that train personnel and local police and fire officials had no clue how to handle the toxic spill.

Why did the EPA miss this danger? Because it relied on the kindness of businessmen. At an October hearing on pesticide safety, Victor Kimm, the EPA's deputy assistant administrator for pesticides and toxic substances, said that agency staff members didn't know the chemical was hazardous because they hadn't read two reports submitted in 1987 by the company that makes it. Why not? Because, according to Kimm, the company "did not follow the recommendation in the 1985 rule to identify the submissions as 6 (a) (2) data" - in other words, hazardous to human health or the environment. Imagine Dick Tracy saying he didn't notice what Mumbles and Pruneface were up to because they didn't fill out the proper forms. A subsequent submission by the company was properly marked, but Kimm says his staff failed to pick it up. In defending his agency, Kimm also noted that the pesticide staff was extremely busy, adding that the agency's enforcement authority is so limited that numerous companies have simply refused to allow inspectors to conduct inspections.

This example points up another tremendous danger, the condition of the national transport system. Most of us are familiar with the effects of deregulation on the airline industry; it has not only produced great concentration in the industry but has overtaxed both air traffic controllers and aging jets. And as demonstrated by the spill, our railroad system is hardly a model of safety. Although the National Transportation Safety Board has repeatedly said the type of tank car involved in the Sacramento River spill is too weak to hold hazardous materials, a Los Angeles Times investigation found that most of the 1.5 million carloads of such materials shipped by rail use precisely those cars. All aboard?

Fowl play

In theory, trusting a business to police itself can make a lot of sense. After all, if you buy a faulty product from one company, chances are you won't buy from it again. And if enough consumers suffer that experience, or if the problem is dramatic enough to draw media attention, the company will be hit hard financially - a powerful incentive to maintain excellent quality control. But saying we don't need regulators because corporations want customers is a little like saying we don't need cops because everyone wants friends. As long as people feel they won't get caught, a yearning for profits and popularity will drive some to commit nasty acts. Just ask Ivan Boesky or Richard Nixon.

Now, it would seem that food inspection would provide an ideal case in which to let the market work its magic - there's little that's more memorable, or attention-getting, than food poisoning. And in practice, the federal government does cede to chicken companies, for example, most of the responsibility for ensuring that your next picnic doesn't turn out like the Jonestown massacre.

But according to the United States Department of Agriculture's (USDA) reckoning, an astonishing 80 percent of all poultry sold in the United States is contaminated with dangerous bacteria. The Centers for Disease Control (CDC) estimate that at least four million Americans become sick and 2,000 die each year from salmonella and campylobacter poisoning, generally from poultry. And these facts have been widely publicized. Evidently, adverse public response hasn't been strong enough to force poultry companies to conduct adequate quality control. (This makes sense: Do you really notice if you buy Holly Farms or Perdue? And even if you do, if you got sick would you blame the poultry plant, the grocery store, the restaurant, or the cook?) And the federal government sure isn't picking up the slack. According to Carol Tucker Foreman, a former assistant secretary of agriculture responsible for meat and poultry inspection, inspectors are supposed to examine chickens by fondling them as they whiz past at a rate of one every two seconds. The National Academy of Sciences says this system simply cannot catch the lethal bacteria and feces that spread through the birds when they are processed.

Rather than revamp the current regulations, the administration has supported the industry's argument, borrowed from the National Rifle Association: Chickens don't kill people, chefs do. The government argues that the answer lies not in the processing plant but on the grill - encouraging consumers to try to catch as much bacteria as possible by washing meat carefully and cooking it thoroughly. But once the chicken makes it into the kitchen, your counter, your knife, your pans, and your hands and anything else they touch will become contaminated.

Like most agricultural interests, the $16 billion poultry industry is cozy with Congress and the administration. The National Broiler Council, its chief lobby arm, regularly makes sizeable campaign contributions - an act that imperils efforts such as those of Senator Howard Metzenbaum to reregulate the poultry industry. Of course, rather than wait for congressional action, the USDA could simply propose tighter regulations. But the poultry industry has friends there, too. People like Lester Crawford, who as head of the USDA's Food Safety and Inspection Services (FSIS) was feted by the industry in places like Hawaii and San Diego. After he stepped down in August, Crawford, who was also the brains behind the proposal to streamline (read: speed up) beef inspection, was rewarded for his devotion with a post as executive vice president of the National Food Processors Association, a trade group for food manufacturers, including companies like Campbell Soup that are subject to poultry inspection.

Although Crawford has left the government, his proposal for inspecting beef - the same approach that has been in place since 1983 for poultry - lives on. It would shift more responsibility for policing the quality of beef to the slaughterhouses. The USDA says this would increase meat plant productivity by some 40 percent, doing more with less by relying on a random statistical sampling plan. According to the Government Accountability Project, which opposes the move, the streamlined inspection system would in effect call for inspectors to check on average only 3 full beef carcasses out of 1,000-as opposed to the 1,000 out of 1,000 that are checked today. Moreover, they'd have a total of 12 seconds to examine each carcass. During the pilot program, whistleblowers said that the proportion of unwholesome beef products earning USDA approval - beef enhanced by tasty items like manure, hair, hide, metal, chewing tobacco, and cactus thorns - rose from 3 percent of carcasses to 24 percent. That's almost one in four.

Sleeping watchdogs lie

If a company is willing to let manure into the food it sells, imagine what it's willing to do to its workers. Unlike consumers, workers usually need the company more than the company needs them - they're in much less of a position to vote with their feet. So as one might expect, another broad area crying out for tougher federal policing is the workplace. Although there have been some signs that federal regulators, at least at OSHA, are waking up to dangers on the job, enforcement of basic health and safety rules still lags, a fact tragically highlighted by the Hamlet, North Carolina, poultry plant fire in September. As investigators sifted through the remains of the plant, where 25 people burned to death, the federal government was quick to lay blame. North Carolina inspectors were too lax, declared Gerard Scannell, the federal OSHA chief, who demanded a role in investigating the tragedy. If federal inspectors had been in charge, he implied at a congressional hearing after the blaze, the tragedy could have been avoided.

But not only did the feds approve the state's review of the plant each year without bothering to check on how it was working, the fact is that federal inspectors were inside the hazard-ridden Imperial Foods Product plant pretty much every day. Why didn't they report the dangers?

One clue might be that these inspectors came from the FSIS, hardly known for its skeptical attitude toward the industry. In a September 19 letter to the FSIS's acting administrator, Ronald Prucha, Rep. Charles Rose asked for a record of all correspondence between the FSIS and OSHA, citing recent congressional testimony that five of the eight doors at the plant were regularly locked during working hours.

"None of the three regularly |open' doors at the plant was easily accessible during the explosion and fire," wrote Rose, who chairs the House Agriculture Subcommittee on Department Operations, Research, and Foreign Agriculture. "None of the eight |exits' were identified with readily visible, suitably illuminated |exit' signs . . . apparently in violation of the FSIS Safety and Health Program. . . . I have reason to believe that the very comprehensive safety monitoring, reporting, and enforcement provisions of the FSIS Safety and Health Program were not adequately administered by the FSIS or else corrective action would have been taken to ensure the safety of . . . workers." As one aide to Rose put it, "If they had enforced the safety regulations they had, it would probably have saved some lives."

The agency's response did not exactly clarify the situation. "They sent 20 pages worth of stuff," the aide said. "A booklet on how to sharpen knives, the kind of safety movies people were watching [but] none of the annual safety reports that the USDA was supposed to file. And nothing to indicate the doors were locked. Somebody was in the plant every day and had to know the doors were locked."

The children poisoned at Brio, the millions who get sick each year after eating federally approved chicken, and the workers who died in North Carolina shared at least one thing: an assumption - a priori, as the philosophers would say - that they would be okay. It's similar to the assumption made by anyone who stuck money in an S&L in the early eighties. Certainly, part of the explanation is that people don't walk around expecting the worst. But part of it is that, amazingly enough, they still trust the government, even when regulation is proven over and over to be lax. This is why when companies receive federal approval for their products, they tend to brag about it. It's okay, says that purple USDA stamp. Enjoy your meal. But perhaps more astonishing, after a decade of antiregulation rhetoric, is that people still assume Uncle Sam is watching out for them even when there's no reason to think so - even when he's not doing a damn thing, and never has.

Take cosmetics. One government survey revealed that 65 percent of Americans think the FDA approves cosmetics and beauty products like hair dyes. They're wrong. The FDA, since long before the Reagan presidency, has left inspection entirely to the manufacturers. Who cares? Well, you should. Research has shown that many chemicals used in cosmetics - such as coal tar in hair dyes and coloring agents in lipstick - are absorbed into the body. What they do once they're there - weaken the kidneys? kill brain cells? cause cancer? - no one knows. But Heinz Eiermann, who until recently headed the FDA's Colors and Cosmetics Division, which keeps records voluntarily filed by companies on their products' ingredients, said last year, "If the American public wants us to be the arbiter of safety, then that cannot be done at the present time."

The important lesson here is not that government testers should be dying their hair and trying on lipstick. It's that consumers expect them to be doing so, just as they expect them to be vetting other products that might endanger their health. Americans haven't given up on the basic expectation that their government is making its best effort to protect them, not just from Iraqi madmen, but from domestic dangers as well. This means, given that this is a democracy, that the government shouldn't give up, either.

Incurious George

Footdragging at the White House is the chief obstacle to a renewed effort at smart regulation. So far, Bush seems more interested in the appearance of regulation than the reality - more interested in raising expectations than in meeting them. Hence he dubs himself the "Environmental President" and sends out joyful press releases when Congress toughens the Clean Air Act. But he follows up by quietly dispatching squads of White House goons to kill virtually every rule the EPA writes to carry it out. Rep. Ron Wyden, who for the past few years has pitched a bill to regulate cosmetics, doesn't expect any help from Bush. The president's "priorities are a New World Order and not a creative, innovative approach to setting out the ground rules in a number of these domestic areas like health and safety," he says.

Sure, some of Bush's regulators look great, such as William Reilly, the former president of the Conservation Foundation/World Wildlife Fund who heads the EPA, or David Kessler, the doctor cum lawyer cum public health advocate who runs the FDA. But, in general, Bush carefully reins in these mavericks. Although Kessler recently asked Congress for more enforcement power, which he desperately needed, the administration barred him from testifying before Congress in support of his own idea.

The lack of a central direction on reregulation explains why agencies keep finding themselves on opposite sides of the same issue, as in the well-publicized battle between the FDA and the Agriculture Department over nutrition labeling. Similarly, the Nuclear Regulatory Commission wants to ease burial and recycling of products with low-level radioactive wastes, while most EPA staff members oppose the move. And a GAO study found that 10 federal offices believed they did not have the authority to police various chemicals, even though they do, and thus "alcohol, tobacco, and pesticides are all less regulated than they might otherwise be." Sometimes individual agencies even seem divided against themselves: For instance, former Secretary of Labor Elizabeth Dole proclaimed that she wanted to put repetitive motion injuries at the top of her priority list but never issued a standard. This summer, 31 unions petitioned the agency to take emergency action on the issue, but the Labor Department still hasn't acted.

And what the administration's press releases omit is that many of the new reforms have been forced down its throat, the result of legal cases against the government that have bounced back and forth between the courts and the agencies for years. The recent restriction on the use of parathion, for example, followed nearly 10 years of litigation initiated by the Natural Resources Defense Council. OSHA's move to classify formaldehyde as a cancer risk, to label it as such, to train workers to use it carefully, and to monitor their health came more than a decade after the National Institute of Occupational Safety and Health recommended the government do so - and after the United Auto Workers filed suit. Even the recent adoption of sulfur dioxide emission controls at the Grand Canyon's Navajo Generating Station, much touted by Bush, followed a protracted battle against the controls by the Bush administration itself.

See ya later, regulator

Efforts to thwart improved regulation don't always proceed from the top down. Sometimes they come from entrenched bureaucrats. One source close to the FDA's Kessler says that both Kessler and his top aide have been walled off from the day-to-day goings-on of the agency. One recent case in which Kessler seemed out of the loop was the hiring of a Washington law firm to conduct a so-called integrity review of the FDA.

For D.C.'s Shaw, Pittman, Potts & Trowbridge, the assignment was a dream: The firm's lawyers would spend six months interviewing agency officials and combing confidential files, for a whopping fee of $710,558. But the real payoff would come later. What Kessler was apparently unaware of, but his underlings knew, was that the law firm lobbies for RJR Nabisco and, through a subsidiary lobby project, for Nutrasweet and its parent firm, Monsanto, as well as other businesses that are heavily regulated by the FDA.

"We view this as an opportunity to do something that is, frankly, professionally rewarding," J. Thomas Lenhart, a partner with the firm, told Legal Times, which exposed the potential conflict of interest in September. "Obviously it gives us a chance to learn more about a substantial area of legal work. . . . We hope it may well open up new professional opportunities in the future." No doubt. In essence, the FDA had agreed to pay these lawyers almost three quarters of a million dollars to figure out how best to help their corporate clients get around the FDA. The same law firm, by the way, recently launched a coalition to fight any tightening of workplace safety and health rules. After Rep. John Dingell grilled Kessler about the plan at a September hearing, the FDA chief, apparently caught unaware, canceled the remaining $400,000 or so of the contract.

Other dirty deals undercut hopes of tougher enforcement from the FDA. As soon as Kessler began making noises about even trying to toughen the FDA's approach, he lost many of his top legal advisers. Where did they go? To law firms planning to cash in when, should a day of tighter regulation be dawning, food and drug companies come looking for help.

In the food and drug coup of the year, Arnold & Porter, a Washington law firm, snagged the FDA's top litigator, Arthur Levine. Levine left his post in April after more than 20 years with the agency to become a partner in the firm, which lobbies for Philip Morris and its subsidiary, Miller Brewing Co., as well as General Mills and Pfizer. About the same time, the Washington office of Cleveland's Baker & Hostetler signed FDA refugee Donald Segal as a partner. Segal, who left after about 12 years, had most recently been associate chief counsel for medical devices. Not to be outdone, Patton, Boggs & Blow got itself the other associate chief counsel for medical devices, Mark Heller. Heller left the agency in May after about 10 years to become a partner in the firm, whose services include lobbying Congress against the Food, Drug, Cosmetic and Device Enforcement Amendments of 1991 - a proposal to strengthen FDA's enforcement capability. By November, Heller was lobbying hard for the plastic surgeons' trade association to prevent his old agency from banning precisely the type of "medical devices" he used to police - silicone gel breast implants, which are suspected of hurting hundreds of thousands of women.

Law firms were not alone in exploiting the skills and contacts of erstwhile FDA officials. In June, pharmaceutical giant Glaxo Inc. hired Hugh Cannon, FDA's associate commissioner for legislative affairs. Cannon, who became director of federal agency relations for Glaxo, says, "I've got a daughter who's going to be a senior in high school. In one more year - college costs. It was time to build something for my family."

The revolving door doesn't cause problems only for the FDA. The enactment of the Clean Air Act amendments last year sent many Capitol Hill aides scurrying to their computers to print up resumes. Charles Knauss, former chief minority counsel to the House Energy and Commerce Committee, landed a partnership at the D.C. law firm Swidler & Berlin, which represents a wide array of clients worried about the act's implementation. Robert Hurley, former minority staff director of the Senate Environment and Public Works Committee, headed for R. Duffy Wall & Associates. Hurley became vice president of the unusually secretive lobby shop, whose clients include the Pittston Group.

In other words, the more the regulators try to crack down, the faster the revolving door spins, and the better corporations get at finding loopholes. Talk about diminishing returns.

Passing a law to jam the revolving door - to prevent retired public servants from profiting in the private sector from knowledge gained at public expense - is a first step toward making regulation work. But more than anything else, what's needed is a change in attitude at the top.

Quayle lays a reg

There have been some hopeful, if ultimately misleading, signs of such a change. The effort by, of all people, Dan Quayle - Bush's chief antiregulation attack dog - to reform our legal system by switching to a loser-pays system implicitly concedes what liberals have long argued: There's no such thing as a "free" market. Government has the obligation to establish fair rules for competition in the marketplace - and then to keep watch and intervene to rewrite those rules if, as in the case of lawyers, the game goes awry.

In fact, switching to loser pays is a classic instance of smart government regulation. If the loser of a suit had to cover the winner's legal fees, businesses would benefit because frivolous suits - ones filed in hopes of extorting a settlement from a corporation unwilling to pay the costs of a protracted court battle - would disappear. And average citizens would benefit because they would no longer need a fat bank account or a high-profile claim to afford a good lawyer - they'd need only a just grievance. All we'd lose is a grotesque market inefficiency: the proliferation of frivolous suits, which have engorged the coffers of big legal firms to the point where they can afford to woo second-year law students by paying them $1,600 a week during the summer to eat at trendy restaurants and watch baseball games from the firms' skyboxes.

But you don't have to stretch your imagination too far to suspect that Quayle has the interests of the Union Carbides rather than those of the Gideons of America at heart. You just have to realize that the regulatory failures laid out here are only the tip of the iceberg. One in six children is believed to be contaminated by lead - the most serious environmental health hazard to kids. Yet the administration forced the head of the CDC to testify before Congress against his own recommendations for a cleanup.

If our top regulators are not prepared to take on a health hazard that has been documented for decades (they are attacking it in one building - the vice-presidential mansion), how can they possibly hope to regulate genetically engineered agricultural products or whatever new games the people who brought us the leveraged buyout have in store? It's time to get smart about economic law, and to get tough on economic crime. Those 65 percent of Americans who expect the government to be policing cosmetics may seem naive, but they're really very wise. The best step they could take would be to unambiguously share that wisdom with the presidential candidates in 1992.

Sheila Kaplan is a senior reporter at Legal Times. Research assistance was provided Eric Konigsberg.
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Title Annotation:federal regulators
Author:Kaplan, Sheila
Publication:Washington Monthly
Date:Dec 1, 1991
Previous Article:Divided We Fall: Gambling with History in the Nineties.
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