Reforming Regulatory Analysis, Review, and Oversight: A Guide for the Perplexed

From: Mercatus Center/George Mason University

Jerry Ellig, Richard Williams

Since President Reagan’s Executive Order 12291, all presidents have issued executive orders (EOs) requiring agencies to conduct comprehensive regulatory impact analyses (RIAs) for significant regulations to ensure that regulatory decisions solve social problems in a cost-beneficial manner. President Clinton’s Executive Order 12866, as amended by President Obama’s Executive Order 13563, outlines the principal requirements that currently apply. However, experience demonstrates that neither the executive orders nor the Office of Management and Budget (OMB) guidance implementing those orders have been sufficient to ensure that regulation accomplishes important public goals without imposing unnecessary costs on the economy. Even when agencies conduct detailed RIAs, there are often significant gaps in the analyses.

Both the president and Congress have grappled in recent years with initiatives intended to reform the analytical requirements and oversight mechanisms that federal agencies must comply with when they propose and finalize regulations. The incoming Obama administration sparked significant speculation when it appointed Cass Sunstein as the administrator of the Office of Information and Regulatory Affairs (OIRA), which reviews executive branch agencies’ regulations and RIAs. In 2002, Sunstein coauthored a seminal article with Robert Hahn proposing a new executive order that would substantially expand RIA requirements and provide for judicial review of RIAs. The new administration sought public comment on revisions to Executive Order 12866. But instead of sweeping reform, the Obama administration produced marginal changes—reaffirming Executive Order 12866, requiring executive branch agencies to undertake retrospective reviews of existing regulations, and requesting that independent agencies abide by the principles of Executive Order 12866 and undertake their own retrospective review initiatives.

Congress has not sat idly by in the debate over reforming regulatory impact analysis requirements. In 2011, the House of Representatives passed the Regulatory Accountability Act—the first major overhaul of the Administrative Procedure Act of 1946 (APA). Among its many provisions, the Regulatory Accountability Act would write many of the analytical requirements in Executive Order 12866 into law; require regulatory agencies to conduct RIAs and seek comment on them in an advance notice of proposed rulemaking (NPRM) before proposing regulations with economic impacts exceeding $100 million annually; require agencies to hold formal rulemaking hearings for regulations with costs or other economic impacts of $1 billion or more annually; and permit judicial review of agencies’ RIAs. This legislation passed the House again in 2013 but has not been acted upon in the Senate.

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