July 29, 2013

Comment on OMB's Draft 2013 Report to Congress on the Benefits and Costs of Federal Regulations

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Congress has asked for the president, through the Office of Information and Regulatory Affairs (OIRA) in OMB, to report on the state of the federal regulatory system for the last 15 years in annual Reports to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities (hereafter referred to as “the Reports”).1While some of the elements Congress requested are present in some of the Reports, none of the Reports gives a complete picture of the state of the federal regulatory system. While the initial Reports were fairly technical summaries about the benefits and costs of the regulations for which OIRA had information, more recently the Reports seem more to be comparing the relative political accomplishments of presidents. None of the Reports in fact describes the state of the federal regulatory system as Congress requested and, instead, they seem to be increasingly politicized. 

The Regulatory Studies Program (RSP) of the Mercatus Center at George Mason University is dedicated to advancing knowledge of the impact of regulation on society. As part of its mission, RSP conducts careful and independent analyses employing contemporary economic scholarship to assess particular rulemaking proposals as well as the overall impact of regulations from the perspective of the public interest.

Introduction 

OMB has been required to report to Congress on the benefits and costs of federal regulations since 1997. The Reports typically project an unwarrantedly optimistic picture of an effective regulatory system protecting us from a variety of risks. As the Regulatory Report Cards prepared by the Mercatus Center show, agencies have consistently done a poor job when evaluating the economic impact of economically significant regulations, including failing to define the market failure being addressed. Unfortunately, this is an institutional problem transcending administrations and political parties. The agencies' estimates of benefits and costs are suspect as well. Furthermore, the increasing number of regulations and the growing pace of enactment may have the effect of decreasing safety. 

What Senator Fred Thompson once called “a more complete picture of the regulatory system” is essential for the Report to be useful to Congress, and should include, at the minimum, better assessment of the quality of regulatory impact analyses; better assessment of the benefits of rules likely to be suspect; unintended consequences of excessive rules; laws whose implementation will likely not result in regulations with benefits exceeding cost; and recommendations for reforming the Administrative Procedure Act. 

The first section of these comments overviews the history and requirements of the Reports on the Costs and Benefits of Federal Regulations (“Reports”). The second section examines the shortcomings of the Reports. The third section considers the recent overstatement of the benefits of rules, including misrepresenting costs to consumers as benefits. The fourth section analyzes how excessive regulation can make us less safe. The final section presents ways to make the Reports more useful to Congress and to improve the regulatory process. 

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