THE PROBLEM

There are two related problems that affect the quality of regulations and the timeliness with which they are promulgated. First, the number of analytic requirements imposed on agencies has grown in number and complexity. These requirements are now so vast that their sum significantly delays most rulemakings without necessarily improving the quality of the regulations. These requirements need to be rationalized, simplified, and in many cases deleted.

Second, the application of some of these analytic requirements has tilted regulatory outcomes decidedly in favor of regulated interests. Regulatory outcomes are often determined by the application of analytical techniques that are mostly used to narrow the criteria by which regulatory standards are set or to justify not regulating at all. Agencies are increasingly forced into regulation-by-numbers. Some quantitative analyses can be helpful in the regulatory process, but they should not be determinative (i.e., not a decisional standard) or unnecessarily imposed on top of statutory mandates. Many of these tools hide assumptions that exist in conducting quantitative analyses; these assumptions can significantly affect the outcome of the analyses. These analyses may also ignore or diminish that which cannot or should not be quantified.

Presidents since Ronald Reagan have required agencies to send a cost-benefit analysis to the White House Office of Information and Regulatory Affairs (OIRA) for major or significant rules. OIRA has frequently used its power as a regulatory clearinghouse to delay or reject agency draft rules, not only on the merits of policy proposals, but because it finds fault with the accompanying analyses. The cost-benefit analysis has been elevated to a key factor in OIRA's decision making, at times conflicting with the agency's statutory mandate.

The complexity of risk assessment and cost-benefit calculations can also delay regulation. Because agencies are required to complete certain analyses before proceeding with a rulemaking, difficulties in researching or composing analyses or disagreements over how to quantify factors can delay completion of an analysis, and therefore slow the movement of actual policy.

As currently employed, cost-benefit analysis results not just in the quantification of costs and benefits, but also in an even narrower quantification — the monetization of cost and benefits to arrive at a "net benefit" calculation, a single dollar number. Cost-benefit analysis hides the uncertainty involved in measuring the costs to society of regulating hazards in certain ways. For example, estimating the monetized benefits from preventing future incidence of cancer generally involves the application of controversial methods and assumptions. Furthermore, cost-benefit analysis ignores altogether both costs and benefits that can't be quantified. Even as presidential executive orders encourage the use of non-quantifiable elements in the cost-benefit analysis equation, the use of "net benefits" ultimately means that non-quantifiable factors are removed in favor of subtracting dollar costs from dollar benefits.

Moreover, calculations of costs and benefits rarely acknowledge market transformations that may occur when businesses adapt to new rules. For example, compliance costs may drop as new technologies are employed. These market changes are excluded from agency analyses.

The one-size-fits-all approach to cost-benefit analysis calculations in regulatory analysis is expensive and time-consuming and often provides an incomplete and inaccurate assessment of the costs and benefits of various policy alternatives. Cost-benefit analysis systematically overstates the costs of potential rules and systematically underestimates the benefits of potential rules because of its focus on quantification.

Congress has passed many public health, worker safety, and environmental quality statutes designed to improve the quality of life in America: for example, the Clean Air Act; the Clean Water Act; the Occupational Safety and Health Act; the Mine Safety and Health Act, the Transportation and Motor Vehicle Safety Act; the Consumer Product Safety Act; the Comprehensive Environmental Response, Compensation, and Liability Act; the Toxic Substances Control Act; and the Resource Conservation and Recovery Act. In passing these statutes, Congress made a conscious choice to make public health and safety the highest priority, not the costs of achieving it. 

SUMMARY OF RECOMMENDATIONS

The recommendations below aim to counter the increasing trend toward quantification in regulatory decision making. Data and information can be critically important to quality regulation, identifying unmet needs, and executing smart policymaking. Nonetheless, the problems regulatory statutes address are complex, and solutions defy a simple numeric answer.

Most importantly, these recommendations call for scaling back the use of cost-benefit analysis as a determining factor in regulatory decisions, for reestablishing the primacy of statutory provisions to guide the promulgation of rules, and eliminating White House directives that instruct agencies on how and when to use cost-benefit analysis. 

DETAILED RECOMMENDATIONS

A.1.   Regulatory solutions and the analysis of regulatory alternatives should be consistent with statutory provisions. If a statute directs agencies to promulgate regulations according to standards of best available technology or with an adequate margin of public health protections, for example, the regulatory options should follow that statutory mandate. This fundamental principle must be followed if the president decides he wishes OIRA to continue transactional reviews of individual significant regulations.

A.2.   To the extent that cost-benefit analyses are done, they should be guided by a set of core principles. We have differing perspectives on the utility of cost-benefit analysis as a tool for regulatory decision-making, and therefore have no recommendations on methods for conducting such analyses. We unanimously agree, however, that OMB's prescriptions for a one-size-fits-all approach to all agency cost-benefit analysis, such as Circular A-4, "Regulatory Analysis," are not the right approach. If the White House or OMB chooses to issue guidance regarding cost-benefit analysis, there must be flexibility for agencies to use this tool in a way that allows agencies to pursue their organizational missions; this principle means that for some agencies, it may be inappropriate to use cost-benefit analysis. To the extent that agencies choose to use cost-benefit analysis, we have unanimity on principles that should guide the use of these analyses within the federal government:

1. Cost-benefit analysis should only be used in ways consistent with the values expressed in statutory or judicial provisions;
2. Cost-benefit analysis is an analytical tool and should not be determinative in regulatory decision making unless specifically required by statute (i.e., it should be a source of information, not a decisional standard);
3. Information and assumptions used in cost-benefit analysis should be transparent and allow for the analysis to be replicated. The analysis should include statements of uncertainty about the assumptions;
4. Cost-benefit analysis should disclose both quantitative and qualitative aspects — and utilize both when interpreting results;
5. Cost-benefit analysis should include an explicit statement about who benefits and who bears the costs; and
6. While it may be appropriate to have methodological questions about cost-benefit analyses conducted by federal agencies, the White House or other regulatory reviewing agencies should never manipulate or alter results. 

Underlying these principles is a belief expressed in other parts of this report that agencies should be afforded flexibility in pursuing regulations. In the context of cost-benefit analyses, the diversity of agency missions, mandates, expertise, and processes makes a one-size-fits-all prescription from the White House or OMB counterproductive.

A.3.   Scientific uncertainty per se does not provide sufficient justification to avoid promulgating regulations. Federal officials should stop using claims of uncertainty to delay or avoid regulation for at least three reasons.

First, full scientific certainty can never be achieved. Pushing for certainty may result in completely stopping regulation in policy areas that rely on scientific information. Scientific research is based on the premise that some uncertainty and variability will always exist. Thus, the decision to regulate should consider the level of scientific uncertainty and risk, but the level should not be a controlling factor.

Second, federal laws often recognize that the government has a responsibility to protect citizens from harms they cannot control. Some statutes explicitly call for some margin of protection. The notion that officials must pinpoint risk (e.g., using dose-response data to find a precise exposure threshold at which harm occurs) before taking action runs counter to many of these statutory requirements. When pursuing statutory goals that emphasize prevention of harm, agencies should not delay action simply because scientific or technical uncertainties exist.

Finally, regulation is not an irreversible course of policy. In the event of significant uncertainty, federal officials should still choose to extend at least some protection as soon as possible while new information develops. As evidence grows, standards can be made more or less stringent if necessary. In fact, subsequent rulemakings may enhance the trust among federal officials and between government and outside stakeholders.

A.4.   Agencies should clearly state problems, identify data gaps, restore needed collection and monitoring programs, and address new information needs as they are confronted with new regulatory problems. As agencies' budgets were reduced and regulatory priorities changed, many data collection programs across policy areas were reduced or eliminated. These cuts have affected the ability of agencies to perform their statutory functions. Public safety and adequate evaluation of regulations requires agencies to collect and analyze data.

In addition, many agencies lack sufficient information technology tools to collect and analyze data to help improve the quality of regulations. Applying new information technology systems can potentially reduce the burden of collecting, reporting, and analyzing data. As part of identifying data gaps and the need for new information, agencies should be given the necessary resources to build this capability.

Not only should the president request adequate resources from Congress each year to do this important work, but Congress should also approve adequate appropriations. Congress also has a responsibility to provide oversight to ensure resources are available and used effectively.

A.5.   The Paperwork Reduction Act needs to be amended and reauthorized. The law requires agencies to seek approval of information collection requests from OIRA when attempting to collect information from ten or more people. The OIRA approval process can delay an agency's ability to collect information it needs to fulfill an agency function. OIRA reviews the "burden" the collection will impose and can reject the request if it believes the number of burden hours to be unreasonable or believes the request lacks practical utility. The Paperwork Reduction Act also requires agencies to reduce paperwork burden by five percent each year and set general goals for burden reduction. Even though the law is mostly noted for the OIRA paperwork clearance process, it primarily addresses the management of information resources, including records management, statistical policy, information dissemination, privacy and security, and information technology. Authorization for appropriations under the law expired in 2001, and Congress has not reauthorized the law.

As Congress moves to reauthorize the law, it should first rebalance the statute to address more clearly the management of information resources in the 21st century (including possibly changing the name of the law).

Second, Congress must eliminate mandatory or automatic percentage reductions in paperwork "burdens" and encourage the use of electronic collection and reporting methods. The five percent reduction has sometimes served as a powerful disincentive within agencies for collecting information to evaluate programs and to identify regulatory gaps. This disincentive must be eliminated.

Third, the president and Congress should consider alternative approaches to the paperwork clearance process that would provide agency flexibility for collection of information on emerging or pressing issues in a timely way. For example, OIRA and agencies could work together to set an annual burden-hour budget that would allow the agency flexibility to collect information on issues as it sees fit without OIRA's approval as long as it is within the budget. This burden-hour budget could be limited to new information collections on new or pressing issues, not for routine collections or standard renewals, which might still go through the traditional OIRA review process.

A.6.   Agencies should develop their own standards for the use of risk assessment according to best practices applicable to the issues with which they are confronted. National Academy of Sciences reports on risk assessment have concluded that agencies should tailor risk assessments to the specific needs for which they are undertaken.⁴ Consistent with our principle of deference to agency expertise, we strongly concur with this recommendation.

A.7.   Implied preemption in rulemakings must be curtailed. The president should instruct agency heads to avoid preemption of state laws when there is no express authority to do so. Too often, agencies have used federal regulation to inappropriately preempt state positive law (proscriptive requirements enacted by legislatures or set by regulatory bodies) and, in some cases, state tort law.

When agencies unilaterally and inappropriately decide to preempt state law through regulation, they remove a proven, valuable method of experimenting with policy solutions, and it removes citizens' recourse if they are harmed by defective products, for example. States have often provided the models for subsequent federal programs and regulatory approaches that advance the public good. The practice of preempting without statutory authority is leading to regulatory standards turned on their heads. Instead of federal regulations traditionally being the floor below which states cannot relax their standards, this approach creates federal standards, without congressional action, as ceilings above which states cannot issue stronger health, safety, and environmental protections.

Unless statutes or the courts expressly give agencies the discretion to preempt state positive law or tort law through regulation, agencies should not include preemption language in rules. If Congress gives agencies authority to preempt state positive law through regulation, agencies should not try to extend their authority to preempt tort law as well.

The next president should ensure his administration leaves decisions about preemption to Congress and abides by those decisions. 

ENDNOTES

1. U.S. Water News Online, "ASCE tells Congress that proposed cuts to Geological Survey budget risk public safety and property," April 1997, available at http://uswaternews.com/archives/arcpolicy/7asctel4.html, last accessed September 23, 2008.
2. U.S. Environmental Protection Agency, "Toxics Release Inventory Burden Reduction Final Rule." 71 Federal Register 76932, December 22, 2006.
3. Background information and source documents compiled by the Project on Scientific Knowledge and Public Policy, available at http://defendingscience.org/case_studies/A-Case-of-Regulatory-Failure-Po...
4. See, for example, National Research Council, Risk Assessment in the Federal Government: Managing the Process, Washington, DC: National Academies Press, 1983. This publication establishes the parameters for using risk assessment.