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Using Cost-Benefit Analysis To Craft Smart Regulation

Federal regulation has a profound effect on U.S. businesses. Business Roundtable CEOs recognize that some regulations are essential and help ensure that the products we consume are safe; the environment in which we live is adequately protected; and the marketplaces in which our businesses operate are fair, open and competitive. However, regulations also impose significant costs on both businesses and consumers and can reduce employment and depress growth. It is therefore imperative that federal agencies carefully consider the positive and negative impacts of proposed rules.

Cost-benefit analysis is the best available tool to evaluate these tradeoffs. Most federal agencies are required by a series of executive orders and guidance to assess the costs and benefits of proposed regulations when they are expected to significantly affect the economy. Only regulations for which the benefits justify the costs are permitted. These requirements have enjoyed broad bipartisan support across presidential administrations for decades, as they help to ensure that the various tradeoffs inherent in any regulation are described, quantified and evaluated before regulations are finalized.