OMB Guidance on Cost of Federal Regulation “Inadequate”

Washington, D.C., March 20, 2012—Today, the Office of Information and Regulatory Affairs within the White House Office of Management and Budget released guidance to agencies on “Cumulative Effects of Regulations” with an emphasis on enhancing net benefits.

The two-page guidance notes, “Public participation can and should be used to evaluate the cumulative effects of regulations, for example through active engagement with affected stakeholders well before the issuance of notices of proposed rulemaking.”

The following may be attributed to Wayne Crews, CEI vice president for policy and director of technology studies, and author of the annual Ten Thousand Commandments report.

OIRA’s guidance is a worthwhile yet inadequate step. OMB does present an annual Report to Congress on the Benefits and Costs of Federal Regulations with a 10-year lookback, but the last time it assembled a cumulative cost number was 2002. An explicit cumulative or redundancy burden assessment is something new and welcome.

However, the emphasis on potentially self-serving agency-assessed net benefits underscores yet again the reality that improving regulatory outcomes fundamentally requires Congress to answer for rule impacts—such as via expedited votes on “economically significant” ($100-million-plus) regulations (The REINS Act is an example).

Since pursuit of known benefits presumably drove any initial decision to legislate and regulate, agencies should focus on minimizing costs within some defensible “regulatory budget” constraint bounded by those potential benefits, as determined by Congress. Costs rarely get measured, making net-benefit assessments somewhat illusory anyway; of 4,128 rules in the recent Unified Agenda pipeline, 212 were “economically significant” and theoretically subject to some analysis, and 418 were subject to small-business Regulatory Impact Analyses of varying quality.

Rules also need segregating into economic, and health and safety categories. And “budget rules” that impact government programs need separate treatment. Otherwise, assessments are incoherent.

Cost estimates of regulation also must take into account the manner in which regulation undermines superior non-governmental institutions and disciplines (insurance, liability, cooperatives) that can serve the public better than top-down rules.

Even now, agencies engage in benefit-free, non-measurable distortions of entire industry structures via limiting access to energy, antitrust regulatory abuse, “net neutrality” rules in telecommunications and government stimulus with regulatory strings attached.

There’s a clash of visions that undermines OIRA’s premise. What would actual net-beneficial cybersecurity regulation entail? A sweeping liberalization of infrastructure industries that’s not even on the table; What would net-beneficial Internet access “regulation” have been? It would have banned net neutrality rather than mandate it; What might a Transportation Safety Administration have done to secure air travel? Perhaps use biometric identification on pilots rather than grope the public at large; What would expanded health access have entailed? Increasing market supply of services, relaxed licensing, and a spanking for the FDA’s drug delays; What will net-beneficial privacy regulation entail? Ensuring that privacy and anonymity remain competitive, not dictated, features; What does sound environmental “regulation” require? Bringing environmental amenities into the wealth-enhancing voluntary sector rather than government mis-management of contrived scarcity.

The irreconcilable worldviews of the pro-central-regulation camp and those favoring harnessing competitive discipline make the OIRA project somewhat futile. To the latter, benefits require liberalization and competitive discipline, and regulators who don’t confuse data with knowledge.

Needed more urgently, then, is more rapid harnessing of regulation at large, such as via a bipartisan Regulatory Reduction Commission that lessens the scope of future cumulative OIRA analyses. Something big has to happen to make this guidance more tractable.

Also vital is an annual regulatory transparency scorecard (with historical tables), somewhat like that depicted here:

• Tallies of “economically significant” rules and minor rules by department, agency, and commission.

• Numbers and percentages of rules impacting small business.

• Depictions of how regulations accumulate as a small business grows.

• Numbers and percentages of regulations that contain numerical cost estimates.

• Tallies of existing cost estimates, including subtotals by agency and grand total.

• Numbers and percentages lacking cost estimates.

Federal Register analysis, including number of pages and proposed and final rule breakdowns by agency.

• Number of major rules reported on by the GAO in its database of reports on regulations.

• Ranking of most active rule-making agencies in economic, heath and safety, and budget rule categories.

• Separate categorization of rules that are deregulatory rather than regulatory.

• Numbers and percentages of rules facing statutory or judicial deadlines that limit executive branch ability to restrain them.

• Rules for which weighing costs and benefits is statutorily prohibited.

• Analysis of numbers and percentages of rules reviewed by OMB and action taken. 

> For more data on regulation, visit