Obama White House Releases Final Cost Of Regulation Report
The day before Christmas Eve, the White House Office of Management and Budget (OMB) released the 2016 Draft Report to Congress on the Benefits and Costs of Federal Regulations and Agency Compliance with the Unfunded Mandates Reform Act.
That’s a mouthful, but this is where the federal government tells us what it reckons to be the “net-benefits” of all the rules it issues every year.
Even though red tape has been controversial this election year, this final Obama regulatory report is the latest ever. The previous record-holder was 2015’s October 17th report.
But as far as I can tell, there’s next to zero news coverage; the report’s scope is just too limited. That’s what we’ll get at here, and why reforms matter so much for the incoming Trump administration.
During fiscal year 2015 (the dates October 1, 2014– September 30, 2015 that the report covers), a selection of 21 executive agency major rules delivered benefits of up to $47.8 billion annually, while costing $5.5 billion to $6.9 billion annually (p. 19-20.), according to the OMB.
Surveying the past decade, OMB pegs the cumulative benefits of a selection of 181 major regulations issued between 2005 and 2015 at between $269 billion and $872 billion (p. 2). Meanwhile, the estimated range for the decade’s costs is pegged at $74 to $110 billion.
Notice that’s just a handful of rules, fewer than 200 since 2001? The most glaring shortfall of this annual report is that administrations (not just Obama’s) tend to declare net-benefits of the entire regulatory enterprise on the basis of such a small handful of rules.
Today’s mantra holds that the subset of major rules (often those anticipated to have a $100 million up-or-down economic impact account for the bulk of regulatory costs. The OMB maintains that (footnote, p. 21):
“[M]ajor rules represented the vast majority of the benefits and costs of all rules promulgated by these agencies and reviewed by OMB. Based on our ongoing review of rules that are and are not major, we believe this trend is still true today.”
Well, OK, but the OMB’s net-benefit breakdown includes only rules for which both benefits and costs have been expressed in quantitative and monetary terms by agencies. As noted, for the $6 to $7 billion cost component encompassing the most recent fiscal year, we are talking about only 21 rules, from six departments plus the Environmental Protection Agency, that had both benefit and cost analysis. It was even worse in prior years: Last time it was 13, and before that, seven, as the chart nearby shows.
But agencies issued, by my check over at the Federal Register, 3,341 rules during the 2015 fiscal year. Numerous categories and cost levels of rules fly below radar. Of the flow of several thousand rules issued by agencies, just a relative handful get OMB-reviewed cost analysis, let alone cost-benefit analysis.
The chart nearby depicts major rules reviewed during the fiscal years 2001 to the present, and shows the small proportion of rules that have any cost analysis. The proportion of major rules with cost analysis averages around 35 percent; the proportion of all rules with any reviewed cost analysis as a percentage of the annual flow of final rules in the Federal Register has averaged just .47 percent.
In any given year, the percentage of all rules that have cost analyses reviewed by OMB, as opposed to just stated by agencies themselves, has never reached one percent; the highest was .8 percent. Benefits fare even more poorly. Most pertinent, rules from independent agencies are absent in OMB’s roundup.
So while OMB notes that “From FY 2006 through FY 2015, Federal agencies published 36,289 final [executive and independent agency] rules in the Federal Register” (p. 7) over 10 years, those with measured and reviewed costs encompass just a few hundred. And along with most rules, OMB misses costs of agency guidance documents and memoranda.
Twenty-nine other major rules in OMB’s report implemented transfer programs; such “budget rules” are officially considered transfers rather than regulations (p. 28). The casual treatment of budget rules as non-regulatory has become inappropriate now that Washington expands middle-class dependency on the federal government.
In contrast to OMB’s few dozen billion in costs over ten years, other estimates consider the broader aggregates. A 2014 National Association of Manufacturers modeled 2012 total annual regulatory costs in the economy of $2.028 trillion in 2014 dollars. My own reckoning using largely government data is $1.9 trillion annually. A Mercatus Center study finds GDP could be $4 trillion higher if regulation had frozen in place a few decades ago.
The Trump administration has promised to freeze regulations and roll back rules for new rules issued. Beefing up the annual cost report will help.
Originally posted to Forbes.com.