Vice President Dan Quayle, a self-proclaimed "zealot when it comes to deregulation," has made his chairmanship of the President's Council on Competitiveness a command post for a war against government regulation of American business.

Democratic members of Congress, public interest groups, environmentalists and others have attacked the council for intervening in behalf of business to scuttle regulations that are the direct responsibility of other federal agencies. Seven congressional committees are investigating the council's activities. But the council's real role is much larger than even its critics imagine.

A six-month examination of the council's work by The Washington Post shows that Quayle and his small council staff of free-market activists have intervened in dozens of unpublicized controversies over important federal regulations, leaving what vice presidential aides call "no fingerprints" on the results of its interventions.

They have changed or tried to change regulations on federal rules relating to commercial aircraft noise, bank liability on property loans, housing accessibility for the disabled, clothing makers' right to work at home, disclosure requirements on pensions, protection of underground water from landfill runoff, reporting requirements for child-care facilities located in religious institutions, and fees for real estate settlements.

"The future of the country is at stake," Quayle said in an interview, "because if you can't figure out a way to basically tame that bureaucracy, and if we can't do it on our watch . . . then who's going to do it? . . . The bureaucrats are smart, they've been here, they've got more ways to skin a cat than you can think of, {and} they've got the press primarily on their side."

Quayle said he has broad authority from President Bush to step into the process of writing federal regulations -- the thousands of rules published each year to implement laws passed by Congress -- wherever he deems necessary. "I am doing what the president wants me to do," he said of what has become his most substantive vice presidential role. "That is to make sure that 'regulatory creep' -- to use his words -- does not get back into his administration."

The council's power is enhanced by what several officials described as an unwritten administration rule that no Cabinet official will appeal its actions to Bush. "I'm the last stop before the president," Quayle said. "I have not had a decision appealed from the Competitiveness Council to the president."

The new White House chief of staff, Samuel K. Skinner, described a "gentlemen's agreement" among administration officials to avoid asking Bush to resolve any disputes except those of utmost importance.

"Why bother the president if you don't have to?" Skinner said in an interview last summer, while he was still serving as transportation secretary. "Number one, you might lose. . . . Number two, you're burdening him with something that he does not like to be burdened with. He wants people to work it out. The gentlemen's agreement is, try to work it out before it gets to him." Bush, according to Skinner, says, " 'I don't want to have to decide between Cabinet members.' Everybody understands that's what the president wants. . . . Anybody that's loyal to the president is going to do it that way."

Together, the "no fingerprints" and "no appeal" rules make Dan Quayle the man to see in the Bush administration for business people across the country and their Washington lobbyists.

Richard Rahn, until recently chief economist of the U.S. Chamber of Commerce, said: "Quayle has gotten into the deregulation battle more substantively than anyone else. He has done his homework. He's forceful. And he's made a difference in the eyes of American business."

In the process, Quayle has infuriated critics such as Rep. Henry A. Waxman (D-Calif.), chairman of the House Energy and Commerce subcommittee on health and the environment, who has accused Quayle of setting up "an illegal shadow government." In an interview, Waxman compared what he called Quayle's "rogue operation" on the domestic front to the Reagan administration's secret maneuvers uncovered in the Iran-contra investigations. "The Council on Competitiveness has usurped power, holds secret meetings with industry groups, and violates administrative procedures on public hearings and public access to information on decision-making," Waxman said.

Waxman said he has long suspected that Quayle and the council staff are involved in many more behind-the-scenes activities, but congressional investigations have been able to bring only a few of the actions to light.

By attempting to "rewrite the laws through regulations" that are so technical "that the public cannot understand," Waxman said, "Quayle has set out to make himself the hero of the conservative forces in this country." Unless there is a public outcry, he said, "it's going to be difficult to stop him," because the issues of the council's authority and its interpretations of the law will take years to resolve in federal courts.

Quayle defended all of the council's actions as proper and legal. He called the criticism "good, old-fashioned politics," and a testament to the council's effectiveness in reducing regulations favored by Democrats.Altering an Established Process

Generally considered a flexible and adaptable politician, Quayle reserves his most passionate political denunciations for "regulatory creep."

As a senator, he kept on his office wall a framed copy of an editorial that his grandfather, newspaper publisher Eugene C. Pulliam, wrote in 1971. The title, "Will the Federal Bureaucracy Destroy Individual Freedom in America?," is one that Quayle quotes often.

In his work with the council, as in other aspects of the vice presidency, Quayle has built on the model George Bush established during his eight years in the job. Bush chaired a similiar group, called the Task Force on Regulatory Relief, and its annual reports bragged of reducing regulations, liberating free-market forces and getting the bureaucracy off the backs of Americans.

C. Boyden Gray, now Bush's White House counsel, managed the project for non-lawyer Bush and opened the regulatory process to business voices.

A Reagan administration executive order authorized the Office of Management and Budget to review regulations for cost effectiveness before agencies make them final. Frequently, there are bitter disputes between the departments and OMB, or between two agencies, over the strictness with which new laws should be applied. In addition, the members of the Democratic-controlled Congress who wrote the bills often want the most rigid interpretations applied, while a business-oriented, Republican administration wants to make the regulatory burden as light as possible.

By putting Quayle and the Competitiveness Council into the game as a kind of Supreme Court of regulations, Bush has altered a well-established federal regulatory process, sanctioned by law, that allows all interested parties the opportunity to comment publicly and argue their positions on the record before regulations are issued. The change has lessened the rule-making power of federal agencies and tipped the outcome of these battles against those in Congress who push for strict regulation.

The council consists of seven members: Quayle, the White House chief of staff, the attorney general, the director of OMB, the chairman of the Council of Economic Advisers, and the secretaries of treasury and commerce. Meetings of the full council are rare, and most of the work is done informally by Quayle and his staff. Quayle said this is intentional.

"I'd much rather have the collision below, rather than . . . at the Competitiveness Council," where stories of bureaucratic battles are more likely to leak because more people are involved, Quayle said. "In this town, especially, you don't want that to come out, that you {did} not prevail. Everybody's a winner -- as long as it doesn't get out."

The council was relatively inactive until mid-1990, when Bush and the business community perceived backsliding from the Reagan administration's deregulatory victories. Directly charged by the president to address the issue more actively, Quayle hired Allan B. Hubbard as the council's executive director. A graduate of both Harvard law and business schools, and the multimillionaire part owner of an Indiana chemical company, Hubbard had managed former Delaware governor Pierre S. "Pete" du Pont IV's bid for the 1988 presidential nomination. Hubbard's wife, Kathy, had been Quayle's chief fund-raiser in his 1980 Senate campaign.

Like others in the libertarian wing of the Republican Party, Hubbard is a strong believer in the efficiency of the free market. "We want to make sure the regulations are consistent with the statutes," he said in an interview. "But we also want to be sure they are the least burdensome to the economy, to protect American competitiveness and preserve American jobs."

As his deputy, Hubbard selected another ardent advocate of free-market economics, David M. McIntosh, a 1983 graduate of the University of Chicago law school and alumnus of the Justice Department.

"Hubbard and McIntosh are the driving force" at the council, said one White House official. Quayle said he encourages and fully supports their conservative activism.

One of Hubbard's first moves as executive director was to ask OMB's Office of Information and Regulatory Affairs for a list of issues on which the agencies had been dragging their feet.

Hubbard and McIntosh began applying the heat to agency lawyers in phone calls or meetings to resolve these issues. Hubbard met personally with the number two officials in many agencies and departments, calling on Quayle to talk to the appropriate Cabinet secretaries when Hubbard was not satisfied.

Word quickly spread through the business community that the Competitiveness Council was ready and able to help on regulatory matters, and its agenda filled up.

In almost every city he visits as a campaigner, Quayle holds closed-door round tables with business people who have made sizable contributions to the local or national GOP. Hubbard, who also has the title of deputy vice presidential chief of staff, often travels with Quayle and sits in on these sessions.Break for Airlines, Not for Ears

Last July 8, Sen. Wendell H. Ford (D-Ky.), chairman of the Commerce, Science and Transportation subcommittee on aviation, and an author of the 1990 Airport Noise and Capacity Act, wrote to Quayle asking for help. United Parcel Service, which has a major facility in Kentucky, and several commercial airlines had complained to Ford that a proposed Federal Aviation Administration rule implementing part of the legislation would unnecessarily hurt them financially and put them at a competitive disadvantage with foreign carriers.

The act requires U.S. airlines to replace noisy aircraft with new, quieter jets by the year 2000. The proposed FAA regulation spread the timetable for getting rid of the noisy planes at a steady pace over the next 10 years, with 25 percent of them to be phased out by 1994, 50 percent by 1996, and 75 percent by 1998.

The airlines had argued to the FAA and OMB, without success, that the rules should emphasize "phasing in," not "phasing out," thereby giving them credit for the quieter planes they had already purchased and allowing them to retain noisy jets in the fleet for years longer.

Ford insisted that the FAA's proposal was far more stringent than Congress had intended. And, while the solution proposed by the airlines would mean prolonged noise for millions who live near airports, it also would provide a tremendous economic break at a time of airline bankruptcies and mergers. According to one analysis used by the council, the airlines' proposal would save the industry $1.2 billion.

Quayle took up the matter directly with Skinner, then the secretary of transportation, the post that oversees the FAA. The two midwesterners are golfing buddies, having played together several dozen times in the last three years.

"I talked with Sam periodically" about the aircraft issue, Quayle said, asking, " 'How's it going?' "

Meanwhile, Hubbard convened a dozen meetings with officials of the FAA, Transportation Department and OMB, seeking an agreement. Hubbard's threat of direct intervention by Quayle and the council ultimately convinced the FAA that a relaxation of the timetable would still comply with the law, and the industry proposal was accepted in its entirety.

"We do not have a monopoly on good ideas," said Kenneth P. Quinn, the FAA's chief counsel. "We welcomed the input of the Competitiveness Council. We learned something . . . and the final rule was a reasonable balancing of environmental benefits versus the economic costs."

Quinn said he had close to 100 conversations or meetings with Skinner over the year they were considering the issue, and although the Competitiveness Council, OMB and the Council of Economic Advisers were heavily involved, "the secretary's prerogative to decide the issue was legitimately preserved" and Skinner "himself made the decision."

It was Skinner who announced the decision, on Sept. 24. It attracted heavy news coverage, for it involved the economic plans of 30 airlines with 2,000 planes and a delay in relieving the eardrums of 3 million people who live near noisy airport flight paths.

Patrick J. Russell, an attorney for the National Airport Watch Group, which represents 300 local anti-noise groups in 75 cities, complained that citizens had little input in a ruling that directly affected them. A USA Today editorial said Skinner's message to those who live near airports was: "Things will be better in 10 years. Meanwhile stuff it. Uncle Sam knows what's best."

News stories barely mentioned the role played by the Competitiveness Council -- and that was just as Quayle wanted it. His staff had discussed the possibility of publicizing his part in the decision and decided not to, because they recognized it was a "political loser," as one of Quayle's aides said. "Millions of people hate airplane noise, and there was no benefit to be derived from being associated with the decision that would mean more noise longer," the aide said.Dispute on Defining Wetlands

"We've had sometimes more visibility than I really want," Quayle said of the publicity surrounding the council. He said he would prefer that most of their interventions, like that on aircraft noise, leave no fingerprints.

But at the same time, Quayle and the president derive immense political benefit from business and big-donor Republican circles because of the council's deregulatory activities.

How many issues has the council been involved in? "Whew, quite a few," Quayle said. "I don't have a number, but this is a big government and people know our mandate is to hold down regulations and try to follow the deregulatory effort that the president established when he was vice president."

Other officials said that Quayle and the council staff limit the interventions to about 50 cases a year, tending to choose those with major economic impact. While Hubbard and McIntosh handle the detailed negotiations with the agencies, Quayle's chief of staff, William Kristol, keeps OMB Director Richard G. Darman, presidential domestic policy adviser Roger Porter and the White House chief of staff advised of council activities.

It is the use of informal, back channels outside public or congressional purview -- designed partly to thwart publicity and partly to hold down the temperature of disputes within the government -- that critics say denies the protections of open government. The approach is illustrated in the case of regulations governing development of the nation's wetlands.

During the 1988 presidential campaign, Bush focused the spotlight on wetlands, pledging "no net loss" of these ecologically fragile areas that foster wildlife and birds, help control floods and filter out contaminants before they enter streams.

Immediately after the election, but before Bush took office, technical specialists at the Environmental Protection Agency and three other agencies issued a manual more strictly defining wetlands in a way that expanded development restrictions on tens of millions of acres.

On his political swings around the country, Quayle said, he heard frequent complaints that the federal government was unnecessarily restricting the use of wetlands for real estate development and other business ventures. Ohio Gov. George Voinovich (R), for whom Quayle had campaigned extensively, "jumped all over me," Quayle recalled, "about one airport expansion project in northwest Ohio" that was being delayed by the wetlands restrictions.

Last May, an official said, Quayle told the council's executive director: "Hubbard, we need to do something about wetlands." EPA Administrator William K. Reilly protested against the intervention. Some White House officials argued that the hot-potato issue should be left to EPA and the other agencies, but Quayle received Bush's approval to become involved.

During the summer, negotiations hit innumerable snags. On the night before Reilly was to testify to the Senate, he, Quayle and Hubbard engaged in a round-robin series of telephone conversations trying to broker a deal. Each time Reilly thought he had Quayle's agreement, Hubbard called Reilly to say he had misunderstood. When their final agreement was presented at a White House senior staff meeting the next morning, Darman and Chief of Staff John H. Sununu erupted, and a last-minute call was made to Reilly -- in his car on the way to the hearing -- to tell him the deal was off.

After that near fiasco, Quayle convened the full Competitiveness Council on July 29. He began the session by expressing astonishment that vast areas of his home state of Indiana could have been classified as wetlands under the original definition in the manual, when he knew those areas were farmland.

According to those present, it quickly became clear that most of the agencies wanted to open more wetlands to development than Reilly did. But Quayle did not let the matter come to a vote, nor did he announce his own decision. "Didn't want to do it," he said in a recent interview. "Too many people spoke up and I felt that we needed a little cooling-off period to see if we could work this out."

Quayle aides suggested that the vice president was being protective of Reilly, knowing that a formal vote overruling the EPA chief's position would leak to the press and damage Reilly with environmental organizations and EPA professionals.

The opportunity for further negotiation came the next day, when Reilly came to Quayle's office to discuss matters related to the vice president's upcoming trip to Latin America. At the end of the visit, Quayle and Hubbard broached a compromise that had surfaced the previous day. The meeting ended without conclusion, but Quayle sent Hubbard after Reilly to press for an answer. Standing near his car in the driveway between the White House and the Old Executive Office Building, Reilly said he'd think about it overnight. The next day he phoned Hubbard to say yes.

The eventual announcement of the deal, which significantly narrowed the definition of wetlands in a way experts have said would halve the amount of protected acreage, served only to stoke the controversy. Final rules remain under review. Environmental groups have assailed the decision, but Quayle said Republican leaders in states such as Georgia and Louisiana have told him that "the best thing you've done is to stop EPA taking away people's property rights." Rep. Waxman has vowed that "at some point, Reilly is going to be called to face how far he is letting this go."

Quayle insisted that he and Reilly are not antagonists. "We have a very good understanding," Quayle said. "He comes at these issues from a very strong environmental point of view, {and} I argue there's some other things that need to be considered." Reilly, who reportedly blames Sununu for many of his problems, apparently harbors no grudge against Quayle. He has told associates that he does not think the council "compromised the integrity of the regulatory process. We are in a process of give and take."

But the critics are likely to press a procedural issue that troubles even some senior administration officials -- the question whether such informal sessions as the Reilly-Hubbard-Quayle meeting violate the rules of open advocacy that govern the regulatory process.

One senior regulatory official, who asked not to be named, said, "I believe in public notice and public comment, and it is not a good idea to have Vice President Quayle and his staff skewing that process."

This official and two senior officials in other agencies said that it was embarrassing that Quayle and his staff could have conversations with business people and others on regulatory matters and not have to report them on the public docket. Said one official of what is standard agency practice, "My people are under strict instructions not to talk to regulated parties, and if they meet someone at a cocktail party and have a discussion inadvertently they must write a memo and file it" with the public record.

Last month, Waxman and others raised conflict-of-interest allegations against Hubbard, who responded by pledging to put his substantial wealth in a blind trust. Waxman, however, is not satisified and says that Quayle himself should have a blind trust. Quayle has nearly $400,000 of stock in Central Newspapers Inc., which is affected by trash recycling regulations the council has handled.

"I don't think they {Quayle and Hubbard} are motivated by traditional greed," Waxman said. "But the attitude is inconsistent with the standards set by Bush for his administration, which is supposed to be there will be no appearance of a conflict."

Quayle rejected that view. "We are trying to hash out differences within the administration," he said, "and this is a rather normal White House function. . . . Congress doesn't like the White House meddling, period. They feel that EPA, for example, should be more beholden to the Congress than to the executive branch. Well, that's just the normal tension that you have between the legislative and the executive branch. We're just diametrically opposed. The White House should be concerned and involved on a rather detailed basis on what kind of regulations are out there. We get blamed for them."

Quayle promised that the deregulation crusade would go forward, and held two long meetings with his staff before Christmas to draw up a list of regulations and issues the council plans to target in 1992.

Researcher David Greenberg contributed to this report.

NEXT: Marilyn Quayle