OMB’s Problematic Circular A-4 Rewrite

OUTLINE                                                  

• Discard the pro-regulatory bias of the federal government
• Restore regulatory streamlining prior to Circular A-4 rewrite
• Restore the $100 million threshold for regulation deemed “significant”
• Comply with existing law on regulatory oversight first
• Grapple with political failure
• Replace “net benefit” analysis with cost “budgeting”
• Restore an aggregate regulatory cost estimate
• Reckon with “harm of regulation”
• Restore the “presumption against economic regulation”
• Pay attention to co-costs, not solely co-benefits
• Recognize differential effects of rules on businesses
• Reaffirm federalism, here and abroad
• Address federal monopoly power
• Incorporate guidance document disclosure protocols
• OMB should not encourage regulating beyond statutory authority
• Enough with nudges
• In summary

The administrative state is, as Steven F. Hayward put it, constitutes an “independent ‘fourth branch’ of government’ that fits nowhere within the scheme of the Constitution as understood by its authors.”² The preparation of cost-benefit analyses for the rules and regulations that fourth branch issues are in part governed by a White House Office and Management and Budget (OMB) guidance document dubbed “Circular A-4.” Joe Biden’s April 6, 2023 Executive Order 14,094³ on “Modernizing Regulatory Review” has triggered a rewrite of the document (Draft Circular⁴). Before Congress stands aside for a Biden administration reformat of regulatory governance that weakens OMB’s watchdog character, fundamental correctives are necessary.

The new Draft Circular suppresses OMB’s legacy overseer role, enlisting it instead in pursuit of “net benefits” as progressives see them. OMB had been the lone brake on the entire pro- regulatory rest of the administrative state. As such, the act of filing formal comments to “improve” this obscure yet influential process risks inadvertently legitimizing an exercise that cannot be fundamentally changed as restoration of the prior regime of stronger oversight seems not on the table. The imperative of the moment is not a Circular A-4 rewrite but withdrawal and rethinking of the document.

OMB’s philosophy was ostensibly different three years ago when it oversaw the “one-in, two- out” regulatory program. Biden’s “Modernizing Regulatory Review”⁵ memorandum issued on day one of his administration sees deregulation as such as harmful, cautioning agencies and OMB against policies with “harmful anti-regulatory or deregulatory effects.” No room exists in the new Draft for the counter-viewpoint that the progressive agenda as such is non-beneficial to American citizens. The Draft Circular narrows the scope of what gets questioned and supervised, and legitimizes expansions of federal oversight.

Any useful Circular A-4 rewrite must broaden Washington’s cramped reckoning of the burdens and encumbrances of coercive regulation. Reasons include.

• Costs of most individual regulations and interventions are often ignored or unquantified;
• Aggregate costs of regulation are always ignored and unquantified;
• Most regulatory costs cannot be quantified (which calls for congressional rule approval);
• The administrative state not only assumes credit for benefits and well-being that are fundamentally the fruits of voluntary pursuits of mankind, but impedes benefits; and
• The administrative state’s vaunted expertise is more fallible and limited than outside expertise; tends to block superior competitive disciplines and risk management; and tends to not yield to evolving institutions of liberty. The Draft Circular would worsen this lock-in.