Comments on New Regulatory Order Pour into OMB

Approximately 170 groups and individuals submitted comments for the Obama administration to consider as it begins reshaping or retaining the current regulatory structure. Although they varied significantly in many details, the comments reflect a familiar split between business interests and public interests that has characterized the regulatory debate for years.

On Jan. 30, President Barack Obama signaled his intention to issue a new regulatory executive order. He sent to the heads of executive departments and agencies a memorandum charging the head of the Office of Management and Budget (OMB) to work with federal agencies to produce recommendations for a new order and to develop the recommendations in 100 days; this 100-day period ends in early May. The memo outlined several factors that agencies should consider when making their recommendations.

On Feb. 26, the Office of Information and Regulatory Affairs (OIRA) published in the Federal Register a request for public comments on revisions to a new regulatory executive order. OIRA is the office within OMB responsible for reviewing significant regulations developed by agencies. OIRA's review function has been in place since President Reagan assigned the duty to the office in 1981. President Clinton, in 1993, issued the current executive order (E.O. 12866) that prescribes how this review takes place.

This was the first time that an administration sought public comment on the development of a regulatory order. In addition, OIRA officials met with several groups to discuss important issues related to designing a new order. Public comments [1] were accepted from the issuance of the Federal Register notice through March 31. The notice contained the same list of factors for public consideration as outlined in the presidential memo to the agencies: 1) the relationship between OIRA and the agencies; 2) disclosure and transparency; 3) public participation in the rulemaking process; 4) the use of cost-benefit analysis; 5) concern for distributional considerations, fairness, and future generations; 6) ways to reduce delay in the review process; 7) the role of behavioral sciences; and 8) the best tools to use in the regulatory process.

Not surprisingly, there was significant disagreement between business interests and public health, labor, environmental, and consumer rights groups on two major issues. First, the majority of industry trade groups supported the existing relationship between OIRA and agencies, citing the need for a central location responsible for coordinating agency activities, identifying duplications or contradictions, and ensuring consistency. The majority urged the administration to preserve OIRA’s rule-by-rule review power. In addition, many groups urged OIRA to expand its review to agency guidance documents and rules promulgated by independent agencies (which are currently exempt from E.O. 12866 review).

Most public interest organizations argued that OIRA's role should change to one of planning and coordinating regulatory activity among federal agencies. They urged OIRA to stop reviewing individual rules because the office does not have the necessary expertise, the review adds to the delay in finishing rules, and the responsibility to produce rules is delegated by Congress to the agencies, not to OIRA.

Several groups wrote that public health or environmental considerations, not compliance costs, should be most important in regulatory decision making. The groups said Congress explicitly elevated safety, health, and environmental considerations above cost considerations in many statutes.

Second, the majority of industry groups expressed support for cost-benefit analysis as it is currently performed. Several expressly supported certain aspects of the existing framework such as the use of discounting future benefits, something strongly opposed by many public interest groups. Several groups called for evaluating the costs of regulations once the regulations have been in place. (Under the current approach, cost-benefit analyses include only estimates of compliance costs before rules are in place.) While strongly supporting the importance of cost-benefit analysis, many industry groups called for modifying the ways in which cost-benefit analysis is conducted by the agencies and used in decision making.

All of the public interest groups called for at least modifying, if not replacing, cost-benefit analysis. Some called for cost-benefit analysis to be used only when statutes require its use. Other groups wanted to supplement the analyses with additional quantitative and qualitative analyses such as cost-effectiveness analysis and distributional impact analyses. Others want to replace cost-benefit analysis with either other economic analyses or considerations of "safety first." Although the two sides disagree over the use of cost-benefit analysis, there was broad support for reassessing the way the tool is currently used if it is retained in a new regulatory order.

Several academic scholars and groups submitted comments, and those, too, were split over these two primary issues. Most of the academic comments, however, also called for modifications or supplements to cost-benefit analysis.

There were also areas of agreement among the various commenters. Broad support exists for increasing transparency in the regulatory process. Many industry and public interest groups, individuals, and academics called for more openness within OIRA and the agencies. Of primary concern to most was the need for greater transparency of communications among OIRA, agencies, and outside interests. There was also strong support for having agencies initiate their online regulatory dockets earlier in the process and for including in those dockets all relevant information, such as scientific and technical studies, communications, and data.

Many commenters also substantially supported increasing public consultation in the process. For example, there was widespread support for expanding and revamping electronic portals to increase public participation and disclosure of information. Agencies and OIRA need to improve their electronic capabilities. There was considerable support for enhancing electronic rulemaking capabilities generally; specific comments focused on improving Regulations.gov, the current government-wide system used for rulemaking activity.

Many comments acknowledged that it takes too much time for rules to be completed, but there was little agreement on solutions to make the process timelier. Some argued that increased coordination and planning by OIRA could speed up the process. Many public interest groups argued that OIRA's review of regulations takes too long and does not appropriately defer to agency expertise. There was substantial support for analyzing the various sources of delay that infect the current process and developing solutions to make the process more responsive.

Many comments addressed distributional considerations generally, but there was little agreement on how this should be done. Few comments specifically addressed the role of behavioral sciences and the best tools to use in the process, the last two topics OMB listed in the request for comments.

The Obama administration has not projected when a new executive order might be completed. On April 20, the administration nominated Cass Sunstein to be OIRA administrator. Sunstein, a colleague of Obama's on the University of Chicago law faculty, is a prolific academic, most recently serving as a faculty member at Harvard University. He is a controversial figure when it comes to administrative law issues and will likely want to have his hand in crafting any executive order. Assuming Sunstein is rapidly confirmed by the Senate, a new order probably will be completed in late summer or early fall.