Part I—The Rise of Regulatory Impact Analysis

The concept of disciplining regulatory choices through the application of benefit-cost analysis to regulatory decisionmaking is largely an American innovation.  As Jim Tozzi has shown, the idea of economic assessment of proposed rules goes back to the Johnson Administration.  Presidents Carter and Reagan issued the executive orders that created the modern system of regulatory impact analyses (RIAs) and executive review within the Office of Information and Regulatory Affairs (OIRA), which has been reaffirmed by every subsequent administration.

Notwithstanding its first-mover status, the U.S. has recently fallen behind many of its international peers.  A recent report by the Council on Foreign Relations shows that countries such as the UK, Canada, and Australia have built on U.S. innovations to design a more comprehensive, sophisticated system of economic analysis.  And though the economic analysis conducted in the European Union tends to be less rigorous than that performed in the U.S., the EU has an integrated system wherein most major proposed laws (including both what would be termed statutes and regulations in the U.S.) are subject to economic analysis.

Despite its flaws, the U.S. system also has many advantages.  Though OIRA reviews only a small sliver of proposed regulations, American RIAs tend to be more exacting than their foreign counterparts, quantifying the benefits and costs of the key regulatory alternatives rather than resorting to a rough qualitative comparison.

And the U.S. system is much more accountable insofar as it features extensive checks and balances.  Specifically, in the EU and Commonwealth nations, the entire enterprise of regulatory lawmaking is driven almost exclusively by career bureaucrats.  In the U.S., non-executive branch entities play a much more significant role.  Congress decides what powers to vest in the agencies and provides instructions on how the agencies are to carry out their regulatory mandates. Regulatory stakeholders file comments related to the economic effects of proposed rules and can consult with OIRA as it is reviewing agency rules.  And the courts review agencies’ RIAs as part of the rulemaking record when a statute requires some form of economic analysis (and even occasionally when it does not).

Most regulatory reforms efforts have focused on enhancing the bureaucratic apparatus for conducting RIAs, seeking to make the U.S. look more like its more innovative foreign counterparts.  This is important, and recent efforts such as the Obama retrospective review initiative (which closely resembles the evaluation component of the EU Better Regulation package) and Trump regulatory budget (which is largely inspired by “1-for-1” and “2-for-1” initiatives in the UK, Australia, and Canada) have purportedly resulted in billions of dollars worth of savings.

Yet the results of these internal executive branch initiatives have often been disappointing.  For instance, retrospective review dates back to the Carter Administration.  Each new president typically commits to combatting “regulatory overreach” by clearing out outdated regulations on the books, and there is typically a flurry of regulatory rescissions early in each new president’s term.  But these efforts tend to fizzle over time, and only a handful of agencies (most notably the Department of Transportation) have constructed anything like an ongoing retrospective review apparatus.  The jury is still out on the Trump Administration’s regulatory reform initiatives.  Though OIRA has recently claimed billions in savings as result of the regulatory budget and other reform efforts, whether these efforts survive into subsequent administrations is an open question.

A more durable effort at regulatory reform must draw on American strengths.  Chief among these is the aforementioned checks and balances.  Whereas the EU lawmaking process is driven largely by the executive branch (Commission), with the legislative branches (Parliament and Council) serving a role of advice and consent, Congress, the courts, and even the general public play key roles in U.S. regulatory policymaking.  And though Parliament occupies the supreme lawmaking role in Commonwealth systems, the government, which grows out of Parliament but is staffed primarily by career bureaucrats, is responsible for regulatory decisionmaking.  The U.S. should draw on its comparative strengths by enlisting Congress, the courts, and regulatory stakeholders rather than relying exclusively on the president and executive branch agencies.

In two recent papers, both of which appear in the Administrative Law Review, we explore various ways in which both Congress and the courts can exercise a more meaningful role in ensuring that agencies produce regulations that are informed by high quality economic analysis. These reforms would supplement rather than replace the existing system of RIAs and OIRA review, promoting higher quality rules and ensuring greater accountability on the part of regulators.

For part 2 of this series, see here. For part 3 of this series, see here.

Reeve Bull is Research Director of the Administrative Conference of the United States. The views expressed in this essay are those of the author and do not necessarily represent the views of the Administrative Conference. Jerry Ellig is a Research Professor at George Washington University’s Regulatory Studies Center.