Toward a New and Improved Regulatory Apparatus: Could a New Review Agency Improve Federal Regulation?

By Batkins, Sam; Brannon, Ike | Regulation, Spring 2013 | Go to article overview

Toward a New and Improved Regulatory Apparatus: Could a New Review Agency Improve Federal Regulation?


Batkins, Sam, Brannon, Ike, Regulation


No one in Washington, D.C. is particularly happy with the nation's current regulatory apparatus. Progressives argue that the Office of Information and Regulatory Affairs, the entity within the president's Office of Management and Budget tasked with reviewing agency rules, stifles consumer and environmental protections and places too much emphasis on costs. Conservatives, on the other hand, protest that OIRA is a feckless political arm of the White House, loathe to curtail egregious rules issued by cabinet agencies and exercising zero control over independent agencies.

Currently, when an executive agency proposes an "economically significant" regulation (meaning that its estimated effect on the economy would be $100 million or greater), it must submit a regulatory impact analysis (RIA) to OIRA for review. The current administration's OIRA has returned for reconsideration precisely one regulation in its first four years, which suggests a lack of interest in regulatory oversight.

The process of analyzing the estimated costs and benefits of proposed regulations and acting on that information should be straightforward, but White House politics and the nation's entrenched regulatory apparatus have made it anything but. The most vocal proponents of rigorous benefit-cost analysis the ranks of which include several former OIRA administrators--claim agency RIAs are often misleading and argue for a process that improves the quality of analysis. Left-leaning regulatory economists, however, are more inclined to give free rein to agencies and favor a more passive role for OIRA.

Many denizens of the regulatory community favor some sort of overhaul of how we propose, analyze, and implement the thousands of rules issued by government agencies each year. Could Congress and the White House work together to create an improved regulatory process that is more transparent, produces objective analysis, and lessens the role of politics in the regulatory process? Several scholars and recent OIRA administrators have proposed three reform options to achieve just that, each of which takes a markedly different route to improving the current process:

* Expand Congress's regulatory role by requiring that it approve major rules issued by any government agency.

* Give OIRA explicit power to return regulations to all agencies, perhaps by codifying the existing, executive orders on OIRA's role in regulatory review and inserting a judicial review element.

* Create a new entity, separate from OIRA and independent of the executive-branch agencies, that would be tasked with producing the RIAs for major regulations instead of allowing the agencies to produce that analysis.

None of those reform proposals is without flaws. But taken together, they make a compelling case that there is plenty of room for improvement.

Inaccurate Cost Estimates

There is little dispute from those who toil in the world of regulatory oversight that the current apparatus is in sore need of an overhaul. Those favoring reduced burdens, or at least more transparency, point to the exploding costs of some recent regulations. From 2009 to 2012, regulators published regulations inflicting compliance costs of more than $518 billion, which surpasses the combined annual gross domestic product of Norway and Portugal.

However, progressives do not see this as a prima facie argument for reform, at least not any changes that might slow the issuance of regulations. Many are more inclined to find fault with the very existence of the benefit-cost analysis apparatus. Georgetown law professor Lisa Heinzerling, who served as a senior administrator at the Environmental Protection Agency early in the Obama administration, decried the use of benefit-cost analysis as inappropriate for evaluating a plethora of agency activities. For instance, she criticizes the decision to analyze recently issued regulations intended to reduce prison rape, writing that "in the topsy-turvy world of cost-benefit analysis, the Department of Justice was compelled to treat rape as just another market exchange, coercion as a side note, and the elimination of prison rape as a good idea only if the economic numbers happened to come out that way. …

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