Reining in the Executive Branch Bureaucracy, Part 4: Put a Spotlight on Economically Significant Rules

Since the Federalist Papers, America has debated “Energy in the Executive.” But President Obama’s 2014 agenda framed by his State of the Union address heralds a class warfare agenda, one fusing an “income inequality” theme with federal industrial policy.

When I can act on my own without Congress, I’m going to do so,” Obama promises. This spend-and-transfer fixation makes Americans poorer and dependent except for the lucky few running things.

Others have argued for federal budget rationality as essential to any anti-poverty agenda. This series proposes a greater prosperity enhancing opportunity, streamlining the nearly $2 trillion regulatory state and ending the uncertainty, wealth destruction and job loss it creates.

Federal regulations are loosely broken into those that are “economically significant” (over $100 million in annual impacts), and those that are not. But that threshold only tells us the minimum level of costs.

For example, given the definition of what an economically significant rule is, we can infer only that the 224 rules so classified in the 2012 federal Unified Agenda, when fully implemented someday, will, loosely speaking, have economic impacts of some $22.4 billion annually (100 million times 224 rules).

We can’t glean any more than that without exploring Regulatory Impact Analyses of specific rules, or figuring out which ones have some clarifying narrative in the annual Report to Congress on the Costs and Benefits of Federal Regulations.

But the latter is unreliable, since for 2013, only the Draft report is available even at this late date (complain to @OMBPress).

Any “Regulatory Report Card” (see Part 3) should naturally include the number of economically significant (or “major”) rules, but this designation would be more informative if expanded to reveal more than the minimum level of costs.

Obama is all about using his “pen” and his “phone” in this “Year of Action” so perhaps he could issue an Executive Order, or perhaps the Office of Management and Budget could develop guidelines, recommending that agencies separate economically significant rules into categories that represent escalating levels of compliance and/or economic costs.

These could be presented in the Regulatory Transparency Report; The following chart offers one suggested format for improved regulatory cost transparency and disclosure for each economically significant rule:

One Proposed Breakdown of “Economically Significant” Rules
Category 1: Over $100 million, Less than $500 million
Category 2: Over $500 million, Less than $1 billion
Category 3: Greater than $1 billion
Category 4: Greater than $5 billion
Category 5: Greater than $10 billion

This particular breakdown is just one option for presenting regulatory cost estimate categories, and was included in the “Restoring Tax and Regulatory Certainty to Small Businesses Act” (S. 3572) noted previously in Part 3.

The “economically significant” designation would be substantially more meaningful if a breakdown by category were implemented: knowing that a rule is or is not economically significant reveals too little in a regulatory enterprise as substantial as the one we have in the United States.

For example, some cost estimates of the Environmental Protection Agency New Source Performance Standards rule figure about $738 million annually. Appreciating EPA is imposing a “Category 2” could be more informative shorthand than merely knowing that the rule is “economically significant”

Next Time: Separately Categorize “Economic,” “Social/Environmental” and “Administrative” Rules