D. Graham, Ph.D.
Office of Information and Regulatory Affairs
Office of Management and Budget
Executive Office of the President of the United States
Prepared for the Conference on Regulatory Reform
Sponsored by the European Policy Centre, Brussels, Belgium
this afternoon is to provide a concise overview of the U.S. regulatory
system, including some indication of recent regulatory reforms that
we are implementing. Much of what I will say is based on the OMB year
2001 report on the Costs and Benefits of Regulation. You can obtain
a copy of this report from our web site at: www.whitehouse.gov/omb.
The report provides a summary of the regulatory philosophy of the Bush
Administration and the reforms we have initiated.
if not designed properly, can hurt the economy and cause the consumer
to pay higher prices for goods and services. The average American household
pays about $6,000 out of its annual household budget because of Federal
regulations. These costs are like an invisible tax because the consumer
does not realize how regulation has impacted the costs of producing
goods and services in the economy. Note that most of these costs are
not surfaced during Federal budget reviews because the costs are imposed
on State and local governments or on private businesses.
of my office is to oversee and coordinate regulatory policy in our Federal
government. The scope of our authority is broad, covering agriculture,
energy, transportation, information technology, housing, manufacturing,
immigration, food safety, health care, public health, occupational safety
and health, environmental protection and criminal justice. The only
regulators we do not oversee are those who are considered independent
of the President. These independent regulators cover important issues
such as the money supply, nuclear plant safety, and certain antitrust
a new regulation in the U.S. is adopted, it must be:
in the Federal Register in proposed form, with an opportunity
for public comment and, in some cases, a formal public hearing,
again in the Federal Register in final form, with written
explanation of any important revisions that have been made and the
official response to public comments.
If a proposed
or final regulation is significant, it must be cleared by my office
before it is published in the Federal Register.
Congress mandated the process of public comment in the Administrative
Procedure Act. This process entails creation of a public docket of information
that Federal judges can review if a regulation is challenged through
litigation. Relevant studies and data used by the regulator are generally
included in the public docket and cited in the Federal Register.
At some Federal agencies, the process of building a record of evidence
and comments is now performed electronically.
Bush supports regulations that are sensible and based on sound science
and economics. The President has instructed me to review each major
regulatory proposal to make sure that it is supported by an adequate
cost-benefit analysis and is consistent with Presidential policies and
priorities and the laws enacted by Congress.
review does not imply that a miserly fellow simply reduces the entire
exercise to a crass, monetary numbers game. The benefits of many regulations,
such as some addressing health, safety, and environmental protection,
cannot be readily quantified and therefore must be analysed qualitatively.
My office is authorized to consider equity and fairness arguments as
well as economic efficiency. Even in cases of qualitative regulatory
analysis, my office looks to see whether the regulator has considered
a reasonable number of regulatory alternatives and made a reasoned judgment.
If the regulatory analysis is inadequate or poorly explained, it is
returned to the agency for further improvement.
are 4,500 new final regulatory actions taken each year by the Federal
government. I am happy to report that we are not expected to review
all of them. We review only 600 significant proposed and final rules
per year, with emphasis on the 100 or so that are judged to have the
largest impact on the American economy. In conducting these reviews,
I am supported by a staff of 25 career public servants with expertise
in economics, policy analysis, statistics, law and information technology.
We are currently adding several scientists and engineers to our team
in order to perform more rigorous reviews of agency proposals.
regard to existing regulations, President Bush does not support across-the-board
deregulation because many rules now in place provide important benefits
to the American people. Under a recent law passed by the U.S. Congress,
my office has asked for public nominations of existing rules that should
be reformed to reduce costs or increase effectiveness. We have suggested
23 of the 71 nominated rules for priority review, and decisions about
how to proceed are now in the hands of the responsible agencies. The
Bush Administration supports this targeted, public-generated process
of reviewing existing rules.
reviews are guided by principles in a Presidential Executive Order,
by the laws of Congress, and by formal technical guidance from my office
on how to conduct a good regulatory analysis. We periodically update
this guidance, and copies are available on our web site. Congress has
also required that our reviews give special attention to the impacts
on small businesses and State and local governments.
review process under President Bush is somewhat different than it was
under President Clinton. In the last three years of the Clinton Administration,
there were exactly zero rules returned to agencies because of poor quality
analysis. In the last six months alone, I have returned 16 significant
proposals to agencies for further consideration. The technical and policy
reasons for each return are explained in public letters that can be
viewed on our web site.
also committed to promoting new regulatory actions where they are needed.
I am not simply referring to the various homeland security rules proposed
since September 11th, those dealing with aviation security,
food safety and immigration control. We have also devised a modest tool
called the "prompt letter" that enables my office to publicly suggest
a new regulatory priority to a Federal agency. Our first four prompt
letters have identified potential lifesaving opportunities at the Food
and Drug Administration, the Occupational Safety and Health Administration,
the National Highway Traffic Safety Administration, and the Environmental
Protection Agency. Copies of these letters are also available on our
web site. Unlike the more definitive Presidential directive, the prompt
letter is a public request that is intended to stimulate agency and
public deliberation. Final decisions about priorities remain with the
agencies and my office will review any resulting proposals.
two or more agencies find themselves in disagreement about a new regulatory
initiative. For example, our Environmental Protection Agency and Department
of Energy are now expressing different views about how new clean air
laws and regulations might affect the energy industry and the economy.
My office has a responsibility to assist in the resolution of these
disputes so that the process of governance can proceed.
further down the road, we are taking long-term steps to enhance the
quality of analysis supporting regulatory proposals. First, in a memorandum
to the President's Management Council, my office has established some
general criteria for competent and credible peer review. We have recommended
that agencies subject their major regulatory proposals, including key
supporting studies, to formal, independent external peer review by qualified
experts in the relevant fields of science. These peer reviews should
be rigorous and open to public scrutiny, and peer reviewers should be
asked to disclose their sources of personal and institutional income
in order to address conflict-of-interest concerns. Second, my office
has issued government-wide guidelines to enhance the quality of data
that agencies use in decision-making and disseminate to the public.
The guidelines require, with limited exceptions, that technical information
used to support major policy decisions be reproducible, preferably through
public access to research design, data, assumptions, and statistical
methods. These guidelines apply to governmental information but also
to private-sector information submitted to -- and relied upon by --
government to support important policy decisions. A distinctive feature
of these guidelines is a new opportunity for the public to challenge
the quality of information disseminated by agencies. If the information
is shown to be of poor quality, the agency must promptly acknowledge
the problem and make any necessary corrections on web sites, reports,
and in rulemaking notices.
like to conclude by explaining what my office means by the words transparency
and openness. When a proposed or final rule is submitted by a regulator
to my office for review, only I or my designee is permitted to communicate
with outside parties interested in the rule. If a meeting with outside
parties is held, a representative of the affected agency must be invited
to attend. Copies of any distributed materials must be placed in OIRA''s
public docket and forwarded to the affected agency. Basic information
about meetings, substantive phone calls, and correspondence -- that
is, date, topic, names of participants and organizations, and in the
case of pertinent correspondence, a copy -- must be promptly placed
in our public docket. Once a rulemaking is completed, relevant written
communications between my office and participating agencies as well
as drafts of the rule, including the draft submitted for review, are
accessible to anyone who requests them. These specific disclosure rules,
described in detail on our web site, are designed to facilitate congressional
and public oversight of our office.
and practice this extraordinary degree of openness because it helps
boost public understanding of and confidence in the process of cost-benefit
review. If instead our office were to operate in secrecy, questions
would be raised about whether nefarious political deals were being made
in ways that favor certain interest groups at the expense of the public
the Bush Administration is developing a smarter and more open regulatory
process. We are adopting new rules when market choices fail to serve
the public interest, modifying existing rules to make them less costly
and more effective, and rescinding outmoded rules whose benefits no
longer justify costs. In the long run, we are building a regulatory
process based on higher quality information. The resulting rules, though
possibly fewer in number, will be more competent, less vulnerable to
political and judicial attack, and worthy of stronger public support.
you for the opportunity to provide these remarks. I look forward to
the opportunity to answer questions and engage in a broader discussion.