Why Congress needs to care about Biden’s ‘Circular A-4’ subterfuge

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Proposed changes in the American government’s executive regulatory functions showcase a conflict of visions over separation of powers; over executive overreach; over the size and scope of government and its role in society generally; and indeed, over the fundamental relation of the individual to the state.

This is especially true of the Office of Management and Budget’s draft “Circular A-4” guidance to agencies on how and when to do regulatory analysis.

The original Circular A-4, which in part governs the practice of cost-benefit analysis in regulatory review now (such as it exists) was issued in 2003. The rewrite exercise, which is scheduled to be finalized by April 2024, was initiated Joe Biden’s April 2023 Executive Order 14,094 on “Modernizing Regulatory Review.”

Coming in the wake of Biden’s total and remorseless dismantling of the limited regulatory streamlining undertaken by Trump, many of the changes proposed in the Draft Circular are highly problematic, and go well beyond abandoning longstanding supervisory practice.

While a precious few proposals are good, the changes on the whole are united in affirmation of a more powerful central regulatory apparatus, disregard for measurement and disclosure of the negatives of governmental appetites in interventions, minimal concern for political failure, and indifference to the duty to extend classical liberal institutions such as property rights and private contract into the governance of complex emerging frontier sectors.

Too many experts are seeking to merely influence or “improve” the Draft rewrite. This effort is hallucinatory. Before OMB is allowed to formalize any new guidelines, a range of changes in philosophy, stance and groundwork are necessary first. All of the following list should be prerequisites before any reformat of Regulatory Review could be undertaken, each of which are detailed in my comments filed to OMB:

• Discard the pro-regulatory bias across the federal government
• Restore Trump-era and other regulatory streamlining prior to Circular A-4 rewrite
• Restore the $100 million threshold for regulation deemed “significant”
• Comply with ignored existing law on regulatory oversight first
• Grapple with the primacy of political failure as opposed to “market failure”
• Replace “net benefit” analysis with cost “budgeting” approaches
• Restore the mandatory but ignored aggregate regulatory cost estimate
• Reckon with the social, environmental and economic harm caused by regulation
• Reaffirm the “presumption against economic regulation” of the original Circular A-4
• Pay attention to and acknowledge the “co-costs,” not solely “co-benefits,” of regulation
• Refrain from federal interventions and instead reaffirm and defer to federalism, here and abroad
• Address coercive federal monopoly power instead of the imagined harm of transitory private market power
• Recognize the necessity of incorporating guidance document disclosure and restraint protocols
• Do not push bounds and patience by encouraging regulating beyond statutory authority
• Drop the worship of behavioral economics and the ensuing paternalistic intervention by “nudges”

Some of those bullet points will be obscure (as, alas, is the entire topic of “federal regulation”), so by all means refer to the filed comments for more. There is much more to say and to be said.

The bottom line is that the Draft Circular A-4 represents more than a mere deterioration from the already inadequate 2003 version, but one more step in a wider decay of regulatory review altogether in the Biden administration.

Rather than seeing regulation as a costly last resort, the pursuit of centralized planning, the displacement of the private sector, and politicized net benefits are seen as good things by this regime. The draft Circular entails not “Modernizing Regulatory Review,” but the doing away with much of it.

As such it should be rejected, not modified. And a broader “national conversation” on what regulation is and does needs to ensue. If that rejection does not take place, the OMB review function may need to be discarded and replaced by Congress or a future administration. It is intolerable that the federal government’s sole watchdog has transformed into acting as a cheerleader for regulation.