18th Straight OMB Annual Report in a Row Finds Total Regulatory Net Benefits

by James Goodwin

March 15, 2016

Over the weekend, the White House Office of Management and Budget (OMB) released the final draft of its annual report on the costs and benefits of federal regulation, which purports to provide a reasonably complete picture of the total impact that federal regulations have on the U.S. economy. This year’s final report finds that federal regulations generated total benefits in the range of $216 billion to $812 billion (in 2001 dollars; in 2010 dollars, the range recalculates to $261 billion to $981 billion) while imposing total costs in the range $57 billion to $85 billion (in 2001 dollars; in 2010 dollars, the range recalculates to $68 billion to $103 billion). According to the report, then, federal regulations make society better off, and significantly so, producing total net benefits in the range of $131 billion to $755 billion (in 2001 dollars; in 2010 dollars, the net benefits range recalculates to $158 billion to $913 billion).

The report’s finding that federal regulation generates such significant net benefits is particularly noteworthy, given that it relies on a methodology—economic cost-benefit analysis—that is highly skewed against regulation. Indeed, if one wanted to design a tool for portraying regulation in an unflattering light, one could hardly do better than economic cost-benefit analysis. After all, the analytic techniques at the heart of economic cost-benefit analysis systematically underestimate regulatory benefits while at the same time systematically overestimating regulatory costs.

Of course, they also dehumanize the benefits of regulation. The cost-benefit technique used by OMB quite literally reduces lives lost to water pollution, asthma attacks induced by air pollution, horrible injuries caused by preventable automobile accidents, and more, much more, to mere dollars and cents. By taking the blood out of the equation, economic cost-benefit analysis has a way of concealing what’s really at stake—and that is precisely the way regulatory opponents prefer it.

All that helps explain why regulatory opponents are so committed to making economic cost-benefit analysis the determinative yardstick for evaluating regulatory decision-making—and why they pushed to enact the so-called Regulatory Right-to-Know Act (via a policy rider on a 2001 appropriations bill) that now compels OMB to publish this annual report.

Despite the biased metric, though, the annual economic cost-benefit analysis report has failed to deliver the antiregulatory results its proponents no doubt desired. OMB has released 18 editions of this report since 1997 (no report was required or produced in 1999), and every single time, it has found that federal regulations generate large net benefits. See the table below (all the final annual reports are achieved here on OMB’s website):

Year

Total Benefits (billions of dollars)

Total Costs (billions of dollars)

1997

$298 (1996 dollars)

$279

1998

$260 - $3,500 (1996 dollars)

$170 - $230

2000

$56 - $1,500 (1996 dollars)

$84 - $140

2001

$250 - $1,800 (1996 dollars)

$150 - $230

2002

$48 - $102 (2001 dollars)

$50 - $53

2003

$146 - $230 (2001 dollars)

$36 - $42

2004

$63 - $169 (2001 dollars)

$35 - $40

2005

$69.6 - $276.8 (2001 dollars)

$34.8 - $39.4

2006

$94 - $449 (2001 dollars)

$37 - $44

2007

$99 - $484 (2001 dollars)

$40 - $46

2008

$122 - $656 (2001 dollars)

$46 - $54

2009

$126 - $663 (2001 dollars)

$51 - $60

2010

$128 - $616 (2001 dollars)

$43 - $55

2011

$132 - $655 (2001 dollars)

$44 - $62

2012

$141 - $691 (2001 dollars)

$42.4 $66.3

2013

$193 - $800 (2001 dollars)

$57 - $84

2014

$217 - $863 (2001 dollars)

$57 - $84

2015

$216 - $812 (2001 dollars)

$57 - $85

 

As you might imagine, the failure of economic cost-benefit analysis to deliver on its promise of defeating new protective safeguards has opponents of regulation scrambling to find a new—and less subtle tool—for the job. This helps to explain why they have turned to promoting outlandish new studies that measure only the costs of regulation—such as the widely panned 2010 Crain and Crain report—and pushing new antiregulatory proposals that ignore benefits altogether, such as regulatory budgeting. For all its flaws, at least economic cost-benefit analysis had some pretense of honesty. Evidently, even conceding that is too much for today’s cohort of regulatory opponents.

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Also from James Goodwin

James Goodwin, J.D., M.P.P., is a Senior Policy Analyst with the Center for Progressive Reform. He joined CPR in May of 2008.

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