Not Your Reg-ular Blog Post

I know most of OMBlog’s readers are budget wonks – or "propellerheads" to use the now-popular White House term – but OMB also takes a very active and serious role in the management of the federal government, and that includes the regulatory agenda.

Each of the past four presidents used Executive Orders to require "regulatory review" by OMB’s Office of Information and Regulatory Affairs (OIRA). The basic idea was that agency regulations, no less than agency budgets, should be subject to review by an institution close to the President, with the ability both to assess regulations and to coordinate the process of interagency review. All four presidents required agencies to pay close attention to cost-benefit analysis.

Two presidents went further and laid out a strategy for how these reviews should be undertaken. In 1981, President Reagan set forth governing principles in Executive Order 12291 (issued in 1981 and followed by the first Bush Administration). That order required the benefits of significant regulations to "outweigh" their costs, required agencies to produce a formal Regulatory Impact Analysis (identifying both benefits and costs), called for agency exploration of alternatives, and established a basic structure for OIRA review of regulations.

In 1993, President Clinton issued Executive Order 12866, which kept many of the essential ingredients of the Reagan-Bush process but also made important changes. Executive Order 12866 softened the emphasis on cost-benefit analysis, requiring the benefits of regulation not to outweigh but to "justify" its costs. It offered a brief reference to "distributive impacts" and "equity." It imposed new disclosure requirements on OIRA, above all when OIRA was meeting with people in the private sector. It specified, in some detail, the institutional structure for regulatory review, offering details about the respective roles of agencies and OIRA. It also said that in the event of a conflict between OIRA and the agencies, the Vice President would act as arbiter.

A great deal has changed since 1993. That is why on January 30, the President issued a memorandum tasking OMB to produce recommendations for a new Executive Order on regulatory review. The purpose is to identify new principles to govern the regulatory process.  We are in an unusually challenging time, and regulation will play an important role in our efforts to respond to many current problems. As the President wrote in his memo, "I strongly believe that regulations are critical to protecting public health, safety, our shared resources, and our economic opportunities and security. While recognizing the expertise and authority of executive branch departments and agencies, I also believe that, if properly conducted, centralized review is both legitimate and appropriate as a means of promoting regulatory goals."

As part of OMB’s instructions, the President asked us to consider some fundamental questions facing modern government, including how the public should participate in the rulemaking process, how we can expand disclosure and transparency, how to best use cost-benefit analysis; how to address distributional considerations, fairness, and concern for the interests of future generations ; how to use the behavioral sciences in formulating regulatory policy; and what might be the best tools for achieving public goals through the regulatory process.

In response to the President’s memo, we published a notice in the Federal Register, asking for comments and suggestions; to date, we have received over 140 responses. We have invited comments by a broad array of specialists in the field of regulatory policy. And we have had a number of meetings with people in the private sector.  We even extended the original comment period because there was so much public interest. To those of you who sent us your thoughts, thank you. (And if you have not commented and would like to, there is still time; the comment period closes at midnight March 31, 2009. You can send your comments here.)