Beginning Steps toward a Regulatory Reform Agenda: Regulatory News in 2009

In 2009, the Obama administration took steps toward rebuilding the federal government's ability to protect public health, workplace safety, and environmental quality. President Obama set out key principles to guide the administration's actions on transparency, regulatory reform, and scientific integrity. He appointed well qualified agency heads who reversed or halted many harmful regulations from the prior administration. In doing so, the president has created expectations for a renewal of government's positive role. The most vexing problems, however – changing a dysfunctional regulatory process and restoring badly needed resources to agencies – remain major hurdles.

When President Obama took office in January, the government's ability to protect the public through regulation had badly deteriorated. Agencies had lost scores of qualified workers, budgets had been slashed, and political considerations overruled regulatory science, laws mandating agency rulemaking, and enforcement programs. Moreover, the process by which these protections are developed had become burdened with obstacles that caused delays and de-emphasized science. The result was a wide range of food safety crises, consumer product recalls, and nearly dormant agencies responsible for worker safety and environmental concerns. In addition, the financial system was teetering on the brink of collapse.

The White House Agenda

Reforming the Process. Obama promptly sought to reform the regulatory process, stating in a Jan. 30 memo [1] that the principles set out in Executive Order 12866, the presidential order that defines much of the structure by which agencies produce regulations, "should be revisited."

On Feb. 4, Obama revoked President Bush's January 2007 order revising E.O. 12866. Bush's order further politicized the regulatory process and threatened to prevent regulatory agencies from setting new standards by expanding the authority of regulatory policy officers and the scope of OIRA's review powers. Obama's decision (E.O. 13497) sent a message that the administration recognizes that agencies need to address public problems more quickly.

In the call for a review of E.O. 12866, the president created a process in which both agency opinions and public comments would be considered for the first time. Obama's memo asked agencies to develop within 100 days recommendations for a new order. Subsequently, on Feb. 26, the Office of Management and Budget (OMB) published a request for public comment in the Federal Register [2]. The administration received by the March 31 closing date approximately 180 comments to consider in drafting a new order.

To date, the administration has not issued a revised order, and the Office of Information and Regulatory Affairs (OIRA) continues to review agencies' rulemakings under E.O. 12866, issued in 1993. The public does not know what regulatory changes agencies recommended to OMB; none of the agencies' submissions have been disclosed.

Transparency. In his first full day in office, the president issued two memos that set out transparency principles intended to drive his administration. The first memo [3], Transparency and Open Government, called for "an unprecedented level of openness in Government." The second memo [4] outlined how the Freedom of Information Act (FOIA) was to be applied during the Obama administration: a presumption of disclosure should inform agencies' FOIA decisions. As a corollary to Obama’s FOIA memo, on March 19, Attorney General Eric Holder issued new guidelines for FOIA implementation that require agencies to adopt a presumption of openness. (For more, see OMB Watch’s 2009 information policy review [5].)

Scientific Integrity. On March 9, Obama issued a memo [6] aimed at restoring scientific integrity in the federal government. Many agencies, especially those charged with protecting the environment, workers, and public health and safety, rely heavily on scientific studies and conclusions.

The memo stated, "Science and the scientific process must inform and guide decisions of my Administration on a wide range of issues …The public must be able to trust the science and the scientific process informing public policy decisions." The memo argued for the importance of disclosure and transparency. It also assigned to the director of the Office of Science and Technology Policy (OSTP) "the responsibility for ensuring the highest level of integrity in all aspects of the executive branch's involvement with scientific and technological processes." The memo identified six principles OSTP should consider when producing recommendations to the president.

To date, these recommendations, which OSTP was to produce in 120 days from the date of the memo, have not been publicly released.

Nominations. Obama's choices to lead his cabinet departments and other agencies represent a sea change from the Bush administration. His appointments are mostly former elected officials with government management expertise or public servants who have served at federal, state, and/or local levels. He has refrained from appointing people either unqualified or tied too closely to interests regulated by the agencies to which they are appointed.

Despite a flawed senatorial confirmation process [7], high-quality appointees are leading key agencies responsible for protecting public health, workplace safety, and environmental quality. Changes in regulatory activity and enforcement are occurring at important agencies like the U.S. Environmental Protection Agency (EPA), the Food and Drug Administration (FDA), and the Consumer Product Safety Commission (CPSC). The recent confirmations of David Michaels at the Occupational Safety and Health Administration (OSHA) and Joseph Main at the Mine Safety and Health Administration (MSHA) raise hopes that long-neglected workplace safety issues will soon be addressed.

As the office that governs federal rulemaking, leadership at OIRA is also critically important to reforming the regulatory process. On April 20, Obama nominated Cass Sunstein, a colleague of Obama's on the University of Chicago law faculty, to be OIRA administrator. Sunstein is a controversial figure when it comes to administrative law issues; he is an ardent supporter of using cost-benefit analysis in regulatory decisions, and he has written about the need to further centralize power in OIRA. He is also a strong proponent of government transparency. How Sunstein makes the transition from legal scholar to government administrator will be critical to defining the Obama regulatory agenda.

Sunstein’s nomination was fraught with controversy [8]. Republican senators placed sequential holds on the nomination because of Sunstein’s views that animals should enjoy meaningful legal rights, including the right to sue. Although Sunstein worked to assuage the concerns of those who raised objections to his views, the holds kept the Senate from debating the nomination before the chamber's August recess.

Meanwhile, the progressive community expressed different, albeit more salient concerns, fearing that Sunstein would support the status quo at OIRA. OMB Watch and many others [9] have argued the role of the office should dramatically change from the rule-by-rule review of agencies' regulations, serve as facilitator for inter-agency reviews, and put greater emphasis on fulfilling its responsibilities under the Paperwork Reduction Act, the law that established OIRA. This changed role could avoid inevitable conflicts with agency heads over regulations and restore the primacy of science in agency decision making.

Midnight Regulations. Among the regulatory successes so far, the Obama administration has made progress in addressing numerous last-minute regulations, so-called midnight regulations, completed in the waning months of the Bush administration. Obama's appointees used a range of strategies [10] to quash or limit the impact of many of those regulations. The White House issued a moratorium on regulations not yet in effect, and employed, on a case-by-case basis, other strategies to revise or stop many last-minute rules that went into effect on or before Jan. 20. Among other successes, agencies restored scientific integrity to the process for making decisions on endangered species, preserved crucial services for Medicaid beneficiaries, and cut back on fossil fuel development in western states. While the administration has largely proven effective in altering the regulatory path of those regulations it has targeted, some actions are still continuing – and some regulations remain unaddressed entirely.

Financial Reform. In January, the country was in the midst of the worst financial crisis since the Great Depression. The administration’s immediate approach to the crisis was to spur economic recovery and rescue the financial system. In March, the Treasury Department released an outline of an ambitious comprehensive financial regulatory reform package that sought to restore responsibility and accountability to the financial system. Treasury released legislative language to, among other things: 1) create a watchdog agency, the Consumer Financial Protection Agency (CFPA), which would set basic safety standards; 2) strengthen investor protections; 3) reform credit rating agencies; and 4) reform predatory mortgage and lending practices.

During the summer and fall, the Senate and House initiated their own proposals, basically modeled on the administration’s legislative blueprint. Both chambers’ packages address the taxpayer-financed rescue of Wall Street and efforts to protect retirement funds and savings, homes and businesses, and consumers from predatory lending abuses.

The House financial reform legislation, H.R. 4173 [11], the Wall Street Reform and Consumer Protection Act of 2009, passed Dec. 11 by a vote of 223 to 202. The Senate Banking Committee held hearings and in November released a 1,100-page discussion draft [12] – an omnibus package of all major financial sector legislative reforms under consideration by the 111th Congress – but has not begun a mark-up of the draft.

In the aftermath of the global financial meltdown, the new administration and Congress began the most ambitious rewriting of the nation’s financial regulatory rules since the 1930s. As was the case then, this is proving to be a multi-year effort. Legislative progress has been slow – a reflection of industry resistance, the complexity of the issues, and other legislative priorities.

Agency Reforms

Resources. Under new leadership in 2009, several agencies began to reform their approaches to providing public protections. One of the most severe challenges they face is the lack of resources – both human and financial – to address the myriad problems threatening the public. Although there was some progress in restoring resources, Congress and the administration have not yet reversed years of funding cuts and the exodus of qualified personnel.

In FY 2009, Obama signed into law an omnibus spending bill that included significant budget increases for CPSC and FDA. However, the bill included only marginal increases for other agencies with budgetary challenges, including MSHA, the Food Safety and Inspection Service (FSIS), and EPA.

For FY 2010, the president initially sought significant funding increases for FDA, OSHA, and EPA. However, Obama proposed only modest increases for other regulatory agencies such as FSIS, MSHA, the National Highway Traffic Safety Administration (NHTSA), and the U.S. Fish and Wildlife Service. Congress showed greater commitment toward regulatory agency funding, boosting the budgets of several key agencies, often above Obama’s requests. (See graphs at right, which refer to enacted appropriations for regulatory agencies from FY 2008 to FY 2010. (Dashed lines represent President Obama’s FY 2010 request.))

Transparency and participation. Throughout 2009, some agencies began to implement the president's call for a more open and participatory government. EPA Administrator Lisa Jackson reinstated principles many considered ignored by the previous administration when she issued on April 23 a memo [13] to staff outlining broad principles of transparency to govern the agency's interactions with the public. By promising to operate EPA as if it were "in a fishbowl," she explained that to gain the public’s trust, EPA "must conduct business with the public openly and fairly." Jackson pledged that all agency programs "will provide for the fullest possible public participation in decision-making," including groups that have been historically underrepresented, such as minorities and those affected disproportionately by pollution.

FDA has also taken steps to improve transparency and public participation at the agency. On June 24, FDA published a notice [14] in the Federal Register asking the public to submit comments to its newly created transparency task force. The task force also held public meetings to gather additional comments. The task force is charged with finding ways the agency can better communicate its decisions and information about public health threats and is to develop recommendations approximately six months after its formation.

Some agencies have begun to change their FOIA policies as well as take other open government actions similar to FDA and EPA. At the same time, other agencies, such as MSHA, seem not to have received the messages the president has sent about a presumption of openness and continue to stonewall public requests [15] for information generally in the public sphere.

Scientific Information. Without OSTP's recommendations to the president on scientific integrity or increased resources, the state of science in the agencies has not been greatly enhanced. For example, little has been done publicly to reverse the Bush-era policies chilling scientists' ability to speak openly about their work, to change media access to agency scientists, or to require scientific information to be disclosed and published.

One notable action in 2009 was EPA's decision to change its process for assessing the public health risks of potentially toxic chemicals. EPA's Integrated Risk Information System (IRIS) staff studies industrial chemicals and posts final risk assessments on EPA's website [16]. On May 21, EPA announced changes it says will decrease the time it takes to conduct the assessments and afford EPA more control over the pace of the process and content of the assessments. Under the Bush administration, EPA and OIRA had added unnecessary steps to the process and provided other agencies with opportunities to interfere with EPA's scientific determinations.

A role for the White House in the revised IRIS process is preserved, giving OMB and possibly other White House offices two opportunities to review IRIS assessments before they are finalized. EPA has insisted that it will maintain control over the process, including the White House review, at all times. The revised process also sets a time limit of 45 days for each review phase and is more transparent. EPA also says that comments on draft assessments should focus solely on science.

Rulemaking. At several agencies, writing regulations in the public interest sat at or near the top of the agenda. On Dec. 7, after months of development, the EPA announced its endangerment finding [17] for greenhouse gases, declaring emissions a threat to "the public health and welfare of current and future generations."

The finding allows agencies to formulate specific regulations. For example, on Sept. 15, EPA and NHTSA jointly issued a proposed regulation covering carbon dioxide emissions from passenger cars and light-duty trucks. EPA also proposed a rule limiting stationary sources emitting more than 25,000 tons of carbon dioxide annually to install best available control technology. The agency plans to finish the rule by April 2010.

OSHA has begun to address a series of workplace issues that have been stuck in the regulatory pipeline [18] for years. Protections against exposure to diacetyl (a chemical compound used to give foods like microwave popcorn a buttery flavor) and silica dust, safety rules for cranes and derricks, prevention of combustible dust explosions, and plans for other workplace hazards are on OSHA's agenda.

The CPSC has also taken on new regulatory tasks [19] after wallowing for years with too few commissioners and inadequate legal authority to address consumer safety issues. CPSC’s top priority in 2009 was implementing the Consumer Product Safety Improvement Act (CPSIA), passed by Congress in late July 2008. Consistent with CPSIA, in 2009, the agency began enforcing stricter standards for lead in children’s products and began requiring manufacturers to mark children's products with information that will allow consumers to identify the products' origins.

OMB’s regulatory office, OIRA, has noted that it has been quickly moving agency rules through the process. The office says that they have reviewed more rules than the past two administrations and at a faster pace. OMB Watch analyzed all notices (proposed and final rules and other regulatory documents published in the Federal Register) sent to and reviewed by OIRA during the first year of the Bush and Obama administrations, up to Dec. 15, 2001, and 2009, respectively. Our analysis shows that OIRA under Obama has approved rules at an average rate of 38.2 days, compared to 44.8 days under Bush. Economically significant rules, those expected to have economic costs or benefits exceeding $100 million per year, have been approved at only a slightly faster rate – 27.8 days for Obama’s OIRA compared to 30.1 days under Bush.

Enforcement. Recent years have illustrated that strong enforcement needs to accompany protective standards. Without resources and the political will to enforce the law, rules are meaningless. It is still early in the administration to have real indicators of agency enforcement, even for those agencies that have received budget increases, but some agencies seem to have made enforcement a higher priority.

In October, EPA released a Clean Water Act Enforcement Action Plan [20] that lays out a broad vision for clean water enforcement as well as specific steps the agency will take in the coming months and years to improve enforcement at the state and federal level.

In July, Jackson publicly committed [21] to emphasizing environmental justice issues and described ways in which the agency intends to reflect environmental justice concerns in the future as EPA formulates rules and emphasizes enforcement.

The administration unveiled a broad food safety agenda July 7, the product of Obama's inter-agency Food Safety Working Group. The agenda pledges to recraft a national food safety system that focuses on preventing, rather than reacting to, foodborne illness outbreaks. To accomplish this, the plan aims to expand regulators' capacity to investigate outbreaks and trace them back to the offending product or food facility. The administration pledged to give investigators at FDA and FSIS, among other agencies, new tools to better monitor the food supply, including a new "incident command system," which "will link all relevant agencies, as well as state and local governments, more effectively to facilitate communication and decision-making in an emergency."

Conclusion

President Obama and the 111th Congress took the stage at a point in U.S. history when our financial and social regulatory systems were failing and scarce federal resources were stretched to the limit. Health care and stabilizing the financial system became the overriding concerns of the administration. Nevertheless, through sound appointments and policy commitments to transparency and scientific evidence, 2009 may mark the beginning of a new era for government in protecting the public. Still, substantial hurdles remain. Without a reformed regulatory process that reduces delay and political interference, and without resources to restore agencies' capabilities, these small steps may lead nowhere.