May 11, 2004

Public Interest Comment on the OMB's 2004 Benefit-Cost Report to Congress

  • Susan Dudley

    Director, George Washington University Regulatory Studies Center
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Stated Purpose:

"[P]rovides a statement of the costs and benefits of Federal regulations and recommendations for regulatory reforms."

Summary of RSP Comment:

1. The estimates of the total costs of regulation presented in OMB’s 2004 draft report to Congress appear to be significantly understated. Annual cost estimates published by the Small Business Administration are over twenty times higher than those presented by OMB ($843 billion compared to under $40 billion). Mercatus Center studies of the costs of regulations issued by EPA’s Office of Water are thirty times higher than OMB’s estimates (approximately $100 billion compared to OMB’s upper bound of $3.3 billion).

2. Though the increased transparency reflected in OMB’s review procedures and in the report itself are welcome improvements to the regulatory process, the benefit and cost estimates in the draft report do not offer the American public an accurate picture of the impact of regulation. The reported benefits and costs are based on agency estimates, without independent verification or any assurance that assumptions and methods are consistent across programs and activities. To be comparable in value to the fiscal budget figures, OMB’s estimates must reflect an independent assessment of regulatory costs and benefits, and not simply provide a summation of agency estimates.

3. In the course of E.O. 12866 review, OMB should hold agencies accountable for following new guidelines for regulatory analysis, peer review and data quality, and return to agencies regulations not supported by analyses that comport with these guidelines. If it does, it may then be able to rely on agency estimates with confidence.

4. Mercatus research supports OMB’s concerns about the regulatory burden on U.S. manufacturers, their employees, and consumers of their products. A survey of 100 U.S. manufacturers suggests that in 2000, U.S. manufacturers spent an average of $2.2 million per firm to comply with federal workplace regulations, or roughly $1,700 per employee. These burdens fall disproportionately on small firms. Manufacturing firms employing under 100 people bear costs of $2,500 per employee, which is 68 percent higher than the cost per employee in firms with 500 or more workers.