What Others Are Saying About the Future of Regulatory Review

by James Goodwin

More than 100 groups and individuals have accepted the invitation from the Office of Management and Budget (OMB) to comment on the new Executive Order on Regulatory Review that the Obama Administration is currently considering.  The extended submission deadline is March 31.  So far, the comments reflect a strikingly wide dividing line between regulatory opponents, on the one side, and individuals and groups committed to protecting the public’s interest in health, safety, and environmental sustainability, on the other.

On the side of regulatory opponents, many conservative scholars (e.g., W. Kip Viscusi and Matthew D. Adler), free market think tanks and advocacy groups (e.g., Center for Regulatory Effectiveness and the Heritage Foundation), and various trade associations (e.g., American Chemistry Council, American Petroleum Institute, and American Trucking Association) have submitted comments pressing their support for the current institution of centralized regulatory review—overseen by the Office of Information and Regulatory Affairs (OIRA) and conducted through the lens of cost-benefit analysis.  For example, Marianne Rowden, of the American Association of Exporters and Importers, maintains that “OIRA plays a critical role in serving as the final regulatory hurdle to be cleared before an agency can issue a regulation.”  Robert A. Hirsh of Associated Builders & Contractors says “Cost-benefit analysis is a critical component of the regulatory review process.”

Several anti-regulatory commenters also called for the expansion or “improvement” of centralized regulatory review and cost-benefit analysis.  For example, Jim Tozzi of the Center for Regulatory Effectiveness was one of several commenters to recommend that the new Executive Order be expanded to require independent regulatory agencies to submit their regulations to a cost-benefit test supervised by OIRA.  (Executive Order 12,866, the current Executive Order on Regulatory Review, does not apply to independent agencies.)  Similarly, several commenters, such as Timothy A. Brown of the National Automobile Dealers Association, recommended that OIRA restore a requirement mandating the use of cost-benefit tests for approving regulatory agency guidance documents—even though President Obama has recently revoked Executive 13,422 (a George W. Bush-era Executive Order that amended and expanded the regulatory review provisions of Executive Order 12,866) in part because it contained this very controversial requirement.  (Executive Order 12,866 does not apply to guidance documents or any other statements made by agencies not constituting regulations.)

Some of the conservative scholars went even further.  David H. Mason, Visiting Senior Fellow at the Heritage Foundation, advocates in his comments that OIRA “establish a research program” to study the use of “disaggregation” to adjust the “value of a statistical life” for different types of risks.  The value of a statistical life is the monetary value that an agency applies to measure the monetary benefit that results from a regulation that saves one life.  With a value of statistical life of $6.3 million, for example, an agency regulation that saves one life produces $6.3 million worth of benefits.  As I've written here previously, supporters of disaggregation are really talking about using lower values of statistical life for the poor and racial minorities—relying on studies reaching the unremarkable conclusion that that people with less money aren’t “willing” to pay as much as rich people to avoid certain hazards.  Disaggregation would in effect introduce racial and socioeconomic discrimination into cost-benefit analysis, and as a result the poor and minorities would systematically receive less regulatory protection.  In another troubling example, Eric Posner, a conservative law professor from the University of Chicago, recommends giving OIRA more enforcement authority to ensure that agencies comply with the new Executive Order on regulatory review.  With such enforcement authority, OIRA would have even greater power to trump the expert judgment of agencies on regulatory matters than it does currently.  Needless to say, Posner’s recommendation is highly inconsistent with democratic principles, since the statutes passed by the democratically-elected Congress explicitly delegate regulatory decision-making authority to the individual agencies and not to OIRA.

On the other side of the regulatory review debate, a number of individuals and organizations committed to protecting the public’s interest in health, safety, and a sustainable environment have submitted comments recommending that the new Executive Order on Regulatory Review terminate—or at least limit—the use of centralized regulatory review and cost-benefit analysis.  For example, OMB Watch recommended that the new Executive Order incorporate a “fundamental restructuring of the relationship between agencies and OIRA based on the fundamentals of agency expertise and statutory authority for decision making.”  Among other things, this would mean that “significant rules would no longer be sent to OIRA for clearance.”  Wenonah Hauter, of Food & Water Watch, recommends that agencies “not be required to engage in cost-benefit analysis for rulemakings involving public health unless required by statute.”  She goes on to note that “agencies are often not permitted by statute to consider costs in designing such rules, so cost-benefit analysis becomes, at best, an exercise in futility, and, at worst, an exercise that serves to undermine legislative mandates.  Also, when a statute is silent on the matter, the agency should be given discretion, regardless of OIRA mandates, to use the tools it deems are best to carry out its functions, which might or might not include cost-effectiveness and cost-benefit analysis.”  Lastly, Victor Kimm, a former regulator at EPA, joined CPR in recommending that OIRA consider placing the use of cost-benefit analysis with pragmatic regulatory impact analysis.

This divide in opinion over the use of centralized regulatory review and cost-benefit analysis is not surprising.  It's no accident that individuals and groups committed to a political agenda of deregulation have come out and defended these institutions so forcefully.  After all, as the CPR board members noted in their own comments, centralized regulatory review and cost-benefit analysis have played a vital role in achieving the regulatory relief sought by these individuals and groups.  And it's not surprising that many of the individuals and public interest groups committed to protecting public health, safety, and the environment favor eliminating or at least limiting centralized regulatory review and cost-benefit analysis.  Indeed, these institutions have become formidable hurdles to promulgating new regulations necessary for protecting people and the environment.  As a result, regulatory agencies—already stretched by dwindling resources and facing increasingly more complex challenges—are prevented from achieving their statutory missions in an effective and timely manner.

On the bright side, the divide frames a unique opportunity for the Obama Administration.  For years, opponents of regulation have presented cost-benefit and centralized review as if they were the only workable ways to do the job.  Debate over.  Move along now.  Nothing to see here.  But it’s clear from the comments the Administration has gotten so far that this is very much a live debate, with striking lineups on both sides.  If industry was expecting that the regulatory status quo was going to withstand the wave of change rolling through Washington without a fight, they were clearly wrong.  The Obama Administration has a budding and significant controversy taking shape, one that pits key proponents of regulatory safeguards for health, safety and the environment, against vociferous opponents.  What will the President do?



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