On regulations, cumulative effects, costs and benefits | Business Roundtable


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On regulations, cumulative effects, costs and benefits

Mar 21, 2012

Cass Sunstein, administrator of OMB's Office of Information and Regulatory Affairs, announced new guidance for executive branch agencies on Tuesday, instructing agencies to take into account the "cumulative effects" of regulations on affected parties. If the agencies seriously follow the guidance,  some of the federal government's regulatory excesses may be ameliorated.

Sunstein explained the intent of the guidance in a blog post, "Smarter Regulation: Reducing Cumulative Burdens." Excerpt:

Today, we are taking another major step toward improving our regulatory system and eliminating unjustified costs. In some cases, the addition of new rules and requirements has unfortunate cumulative effects. Taken in isolation, a new rule may seem perfectly sensible, but it may overlap with existing requirements. The sheer accumulation of regulations can cause real harm, especially for small businesses and startups. As the President said last January, agencies must take into account “the costs of cumulative regulations.”

Among the steps agencies should take is gaining the early involvement of affected parties, with Sunstein highlighting small-business -- presumably hit harder by regulatory overkill.

As Business Roundtable President John Engler noted in a statement, many of the specific approaches the agencies must now pursue were recommended in BRT's report issued last September, Achieving Smarter Regulation . Engler:

America’s CEOs believe that a smarter approach to federal regulation will accelerate business growth, encourage investment and speed up hiring,” Engler said.  “Unfortunately, the current U.S. regulatory regime tends to be so complex and inconsistent that regulations often do the exact opposite. We support the Administration’s effort to enact reforms that streamline the regulatory process, engage regulated parties earlier in the process and take account of the cumulative impact of regulations issued by multiple federal agencies.

Sunstein also testified today on the Obama Administration's regulatory approach before an oversight hearing by the House Judiciary Subcommittee on Courts, Commercial and Administrative Law. (Testimony) In his opening statement, Chairman Lamar Smith (R-TX) questioned whether the Administration's actions matched its rhetoric and promoted several pieces of regulatory reform legislation, including the REINS Act passed out of the full committee on Tuesday H.R. 4078, which puts a freeze on regulations until the unemployment rate is below 6 percent, legislation that passed out of the full committee on Tuesday. While all today's witnesses were excellent, we were struck by the clarity of John Graham, an OIRA administrator in the George W. Bush administration and now dean of the Indiana University School of Public and Environmental Affairs. Excerpt from his prepared statement:

The theme of my testimony is that a substantial amount of costly regulatory activity is occurring without any requirement for benefit-cost analysis or OIRA oversight. I shall illustrate my concerns with case studies of the coal, automotive and housing industries. To rectify the current situation, I recommend that Congress consider legislation that would broaden the scope of federal agency actions that are subject to cost-benefit justification and/or OIRA review.

First, federal regulators are issuing press releases, memoranda of understanding, policy statements, and guidance documents with burdensome impacts on specific industries, yet these quasi-regulatory actions are often not subject to any formal benefit-cost analysis and/or OIRA review.

Graham makes the point through a thorough discussion of how these quasi-regulatory actions have hit surface mining of coal especially hard.

Also testifying were Richard Williams, Director of Policy Research at the Mercatus Center, George Mason University, and Sally Katzen, Visiting Professor of Law, New York University School of Law, an OIRA administrator in the Clinton administration. Katzen testified on how Independent Regulatory Commissions (IRCs) -- SEC, FCC, FTC, FEC, etc. -- currently escape the impact of President Obama's executive orders meant to guide executive branch regulations. Excerpt:

I would encourage the President to go further and extend the provisions of the applicable Executive Orders relating to economic analysis and OIRA review of proposed regulations to the IRCs. There is considerable support across the political spectrum for such an effort, and the President’s Council on Jobs and Competiveness specifically included this as one of its recommendations for regulatory reform in both its interim and final reports (although it called on Congress, rather than the President, to take the lead on this issue).

Finally, writing at Forbes.com, Wayne Crews of the free-market Competitive Enterprise Institute finds reason to doubt the new OIRA guidance and rebuts an op-ed in The Chicago Tribune by Sunstein, "Why Regulations are Good — Again." Crews responds, "Why Regulations Aren't Good -- Again," arguing that the Administration over-emphasizes "potentially self-serving, agency-assessed net benefits rather than costs." He observes:

I can write a rule requiring NASCAR-style safety features in automobiles and make benefits “justify” costs. I can show the benefits of requiring elevators in multi-story homes.

Probably so.


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