During a recent Senate hearing on the nomination to head the Office of Management and Budget’s (OMB) Office of Information and Regulatory Affairs (OIRA)—the federal government’s supposed regulatory watchdog—something called Circular A-4 was mentioned.
Adopted in 1996 and last updated in 2003, Circular A-4 is a guidance document ostensibly aimed at regulatory oversight. It outlines and describes procedures for regulatory impact analysis and net-benefit assessment for major and economically significant rules and regulations.
On President Biden’s first day in office, his “Modernizing Regulatory Review” executive order called for “revisions to OMB’s Circular A-4” guidance. At the September 29 Senate hearing, the OIRA nominee, invoking the virtue of “evidence-based decision making” told senators, “Circular A-4 should be updated to account for advances in scientific and economic understanding in how the costs and benefits of regulation affect the American people and are distributed across populations.”
The 118th and 119th Congresses need to prevent rewrite now that the bureaucracy seeks to replace numerous normal human endeavors with federal priorities and conceits. On Biden’s first day, he called for the Circular A-4 update “to ensure that the review process promotes policies that reflect new developments in scientific and economic understanding, fully accounts for regulatory benefits that are difficult or impossible to quantify, and does not have harmful anti-regulatory or deregulatory effects.” By “deregulatory effects,” he means ending Trump-era deregulation.
Biden asserted that modernization recommendations “should provide concrete suggestions on how the regulatory review process can promote public health and safety, economic growth, social welfare, racial justice, environmental stewardship, human dignity, equity, and the interests of future generations,” and “include proposals that would ensure that regulatory review serves as a tool to affirmatively promote regulations that advance these values.”
The significance of this phrase—to “affirmatively promote regulations”—has become apparent in Biden’s multiple “whole-of-government” campaigns on equity, competition policy, climate, and more. The administration has also undermined disclosure and transparency of regulatory burdens in several ways.
The progressive goal is to remove what government does from cost-benefit scrutiny altogether; not to reinforce oversight by the only federal body that sports such a role. Any progressive rewrite of Circular A-4 in today’s setting would make regulatory overreach worse. Prevention of a progressive rewrite of Circular A-4, paired with aggressive clampdowns on bureaucracy, are needed instead
An honest rewrite of OMB’s Circular A-4 would need to acknowledge the ways in which the current guidance omits most of the regulatory “Costberg” already, as cataloged in the table here:
Unmeasured Costs of the Administrative State and Intervention
Most elemental with respect to unacknowledged costs is the loss of liberty generated by the expanding administrative state. Unmeasured economic regulatory costs have long been gargantuan. Longstanding interventions, with direct and indirect costs unaccounted for in Circular A-4 include:
- Permitting restrictions and denial of access to resources:
- Rent-seeking and crony capitalism;
- Different effects of rules on different businesses;
- Labor interventions like minimum wages and compulsory unionism;
- Perpetuation of early-20th century style infrastructure regulation;
- Diversions of resources and private initiative created by government funding;
- Subsidies to technologies such as in green energy and cybersecurity
A coherent Circular A-4 rewrite is not possible at the moment, given Washington’s inability to address poor regulatory and rulemaking processes. The umbrella over all of these is regulators’ invoking of alleged “market failure” while ignoring political failure, now exacerbated by the politicized responses to economic shocks witnessed in just the 21st century to date. Other elements of poverty in the rulemaking and supervisory process include:
- Ignoring costs of rules not deemed “economically significant” but are in fact burdensome, distortionary, and wealth-dampening;
- Escape of independent agency regulations from assessment:
- Ignoring cumulative effects of rules and official abandonment of both aggregate and yearly assessments;
- Guidance Documents, circulars, letters, bulletins and other regulatory dark matter with non-trivial effects;
- Sue-and-settle agreements;
- Budget or Transfer rules, and their associated displacements and deadweight costs:
- Unfunded mandates on states and localities;
- Regulation by international treaty.
That’s not all inclusive, but it’s enough to show the concerns with pretending certainty about “net benefits” while ignoring net costs. Part of the market’s wealth creation role is developing the risk-management machinery and institutions to accompany new innovations. The same regulators who disrupt that process are unlikely to be self-reflective in any rewrite of Circular A-4. Agencies cannot perform cost benefit analysis nor assess net benefits when their very presence is a cost.
Future articles may look in more detail at Circular A-4 and continue making the case for the upcoming 118th and 119th Congresses to put the brakes on a progressive rewrite of it.