White House’s Final 2014 Report To Congress On Regulatory Costs And Benefits Appears

The White House Office of Management and Budget’s (OMB) final 2014 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities has appeared online. (It’s dated June 22, 2014 on OMB’s website, but actually appeared mid-June 2015; many public comments on the draft version weren’t filed until well after June 2014.)

Surveying regulatory costs and benefits, OMB here pegs the cumulative costs of 116 selected major regulations during the decade from 2003 to 2013 at between $68.5 billion and $101.8 billion, in 2010 dollars (chart pp. 9-11) (compared with 115 rules at between $57 billion and $84 billion in the 2013 report, in 2001 dollars).

Meanwhile, the estimated range for benefits in the new report spanned $261.7 billion to $1,042.1 billion in 2010 dollars (pp. 9-11).

The draft 2015 report should appear shortly.

Whatever shortcomings the report may have, many thoughtful responses to public comments on disclosing and reforming regulatory burdens appear in the final report (including to comments offered from CEI); the OMB typically seems inclined toward willingness to listen to suggestions for improving the report. Even comments CEI offered that were geared toward improving the regulatory process but beyond the scope of improving the report were reprinted in their entirety by OMB. (p. 127)

The OMB’s cost-benefit breakdown incorporates only rules for which both benefits and costs have been expressed in quantitative and monetary terms by agencies, and it omits numerous categories and cost levels of rules. Most pertinent, rules from independent agencies are entirely absent.

For the most recent fiscal year ended September 2013, OMB’s publication reports only seven rules that had both benefit and cost analysis (agencies issue thousands each year, however). These are accompanied by additional costs ranging from $2.4 billion to $3 billion (in 2010 dollars, p. 24). In the prior year’s report, by contrast, OMB had presented 14 rules with costs ranging from $14.8 billion to $19.5 billion added (in 2001 dollars).

Several billion dollars more in annual rule costs generally appear in these reports for rules with cost but without benefit estimates, but these are not tallied and highlighted by OMB. (I have done so here.)

In contrast to OMB’s few dozen billion, other estimates look at the aggregate. A 2014 National Association of Manufacturers (NAM) modeled 2012 total annual regulatory costs in the economy of $2.028 trillion (in 2014 dollars). Earlier governmental estimates before and after the turn of the century from the OMB, the Government Accountability Office (GAO) and the Small Business Administration (SBA), have also noted aggregate annual costs in the hundreds of billions, some well in excess of $1 trillion in today’s dollars. Still another report, by economists John W. Dawson of Appalachian State University and John J. Seater Department of North Carolina State University, pushes regulatory cost impacts into the stratosphere via dozens of trillions of dollars in lost GDP annually.

Policy makers have a responsibility to disclose regulatory costs including indirect and employment effects, whatever uncertainties exist in measuring them (in many respects, costs are unmeasurable to third parties). Given the inherent difficulty of accurately measuring costs and the fact that regulators are unelected, reforms must require our elected representatives to vote approval of regulations before they are effective.

The NAM report and earlier OMB and SBA aggregate surveys typically conveyed regulatory costs in the following categories:

  • Economic regulatory costs (for example, market entry restrictions and transfer payments like price supports that shift money from one pocket to another)
  • Workplace regulatory costs
  • Environmental regulatory costs
  • Paperwork costs

The NAM model picked up on the now-dropped size-of-firms question, and finds overall annual per employee regulatory costs to firms of $9.991. But the impacts by firm size are disparate; per employee regulatory costs for firms of fewer than 50 workers can be 29 percent greater than those for larger firms—$11,724 for smaller firms versus $9,083 for larger ones.

Meanwhile, other developments—including the aftermath of recent major financial, health, and environmental policies—point to substantial regulatory costs not captured by most assessments to date. OMB has more work to do.