An Inaccurate Update on OMB’s Inaccurately Reported Costs of Federal Regulation
Here inside the Beltway we are now in fiscal year 2022. In anticipation of the next edition of the chronically late “annual” Report to Congress on the benefits and costs of federal regulation, let’s take a look at the recent stripped-down editions, particularly regarding rules with some dollar cost disclosure that tend to get left out of the routine net-benefit claims we often hear regarding regulation.
During the Obama administration, net benefits were touted without nodding to offsetting costs that were embedded in the same reports, albeit without benefit calculations. Post-Trump, Biden has effectively eliminated even the strictures of E.O. 13866 on regulatory review by elevating progressive aims to the status of beneficial by definition, declaring deregulation as “harmful,” and enlisted the Office of Management and Budget (OMB) to look for new ways to regulate rather than serve in its traditional watchdog role. Accordingly, we can be confident that when the new Report to Congress eventually appears (I did ask them in a tweet this week if they could maybe issue it before Thanksgiving), net benefits will look just great.
I even recall some gloating over net benefits when the 2017 Report to Congress appeared, because, hey, even the Trump administration was forced to admit net benefits of regulation. But not so fast; the OMB reports, while important, bear no relation to the actual extent of government intervention in the economy—and cannot measure it.
That 2017 report was the last time the federal government took at 10-year lookback at regulations, having abandoned, just after the turn of the century, the requirement for a wider aggregate assessment. Excerpting Table 1-4 from the 2017 Report, here’s an overview of the “Total Annual Benefits and Costs of Major Rules,” in billions of 2015 dollars, covering fiscal years 2007 to 2016. (I break down these dozens of underlying major rules in a separate table.)
Fiscal Year Number of Rules Benefits Costs
2007 12 $37.5 to $241.6 $12.3 to $14.0
2008 11 $9.1 to $32.1 $1.5 to $2.0
2009 16 $11.3 to $40.3 $4.8 to $12.6
2010 17 $24.4 to $112.7 $8.4 to $16.2
2011 12 $45.1 to $117.4 $6.6 to $13.3
2012 14 $69.8 to $150.4 $19.4 to $25.6
2013 7 $33.5 to $88.4 $2.6 to $3.3
2014 13 $10.7 to $24.8 $3.3 to $4.9
2015 21 $25.7 to $48.4 $5.5 to $7.0
2016 17 $18.4 to $36.7 $4.4 to $6.5
Note that benefits are reported to exceed costs, even assuming the lowest benefit applies in any given instance apart from 2009. I’m not critiquing that here, but rather reiterating my own bias of focusing on cost. (Incidentally, in 2016 there were actually 16 rather than 17 rules.) Note that the high-end tabulation for costs is around $105 billion for 10 years.
During the Trump administration, but not until January of this year, we finally got a truncated Report to Congress presenting fiscal years 2017 thru 2019. The tables presenting information like that above and several other traditional presentations were published not in the composite pdf but on Excel spreadsheets, which can be considered good or bad—but definitely bad was the disappearance of the 10-year lookback, which I fear will not return under Biden, either.
Anyway, looking at benefits and costs from these Trump-era fiscal years 2018, 2019, and 2020 reports, we get:
Fiscal Year Number of Rules Benefits Costs
2017 20 $6.9 to $11.0 $2.5 to $3.7 (2016 dollars)
2018 5 $0.2 to $0.6 $0.1 to $0.3 (2017 dollars)
2019 5 $0.2 to $3.7 up to $0.6 (2018 dollars)
Here, the cumulative high end for costs is around $4.6 billion compared to the $105 billion for the prior 10 years. For a lot of reasons, I don’t think either are representative of the costs of federal intervention (see “Swamp Things” in the latest edition of Ten Thousand Commandments, for example), but they are nonetheless important markers.
In any given year, there are far more rules issued that appear in the OMB roundup than those that happen to sport both a cost and benefit assessment, as in those noted above. Dozens or hundreds more are deemed as “significant” each year and many “major” rules go unquantified (see here for a paper on the need to fix this rule-species nomenclature), and the overall annual Federal Register rule count tops 3,000 (except for one time under Trump).
Note also that we still need the fiscal year 2020 and 2021 reports. Biden’s January directive to agencies to ditch Trump’s guidance documents portals and standardized rules regarding their issuance and treatment of the public compound this longer-running lack of disclosure for “ordinary” rules.
What I was interested in taking a look at before the 2021 report gets released (assuming it’s on tap) are the additional costs of major rules, albeit without an accompanying benefit assessment, beyond the standard presentation of the 170 seen above. The answer is presented in the table below. Each year’s Report to Congress presents a number of additional rules with cost assessments as noted, presented here by Fiscal Year.
(Double-click the chart to enlarge it. See web version for notes. Here is a version presented by department or agency.)
Going back to 2002, there are dozens of such rules, with high end cost estimates that max out at some $54 billion. That’s nearly half of what’s shown above in the presentations of rules with both benefits and costs quantified for the past 13 years. It’s not an insignificant amount, yet progressive and administrative observers routinely claim overall regulatory benefits without taking this into account.
While regulators might argue that the benefits of these rules also exceed costs, it is notable that the rules emphasized each year do not cover a sizable portion of even what OMB has on hand, and that is not even taking into account the costs of independent agency rules. Among the other gaps noted above, these rules are absent from everything presented in this brief survey, yet such regulatory bodies are among the most intensive interveners in the private sector.
If we are to return to addressing administrative state reform, improving the presentation information about costs of intervention should be on the agenda.