REGULATION: PROGRESS AND UNFINISHED BUSINESS
John D. Graham, Ph.D.
Office of Information and Regulatory Affairs
Office of Management and Budget
American Bar Association
Section of Administrative Law & Regulatory Practice
New Washington Convention Center
November 6, 2003
When I assumed
the role of OIRA Administrator over two years ago, the President instructed
me to pursue an agenda of "smarter regulation". This phrase
is not simply a "feel-good" slogan; it has profound implications.
It means that we are not uniformly pro-regulation or anti-regulation in
our decision making. We seek to accelerate the adoption of good rules,
modify existing rules to make them more effective and less costly, and
rescind outmoded rules whose benefits do not justify their costs. The
policy principles we use at OMB were actually defined by President Clinton
in 1993 in Executive Order 12866. But as you all know, distinguishing
a good rule from a bad one based on general principles is not always an
to accomplish smarter regulation, we have launched three major initiatives.
They do not involve any new legislation; no executive orders and no campaigns
for regulatory relief. They involve more openness in deliberation, better
regulatory analysis, and higher quality technical information for use
by regulators. Let me say a few words on each initiative.
has practiced an unprecedented degree of openness about how we do our
work. I supervise a staff of about 55 career public servants whose responsibilities
include reviewing roughly 500 rulemakings and 2,000 information-collection
requests each year. We have an open-door policy for visitors interested
in our work and we have made aggressive use of public-comment procedures
to learn about the views of the public. By consulting OMB's web site,
you can learn each day which rules are under formal review at OMB, which
have been cleared or returned, and even which groups have recently lobbied
Dr. Graham: their names, organizations, the date of the meeting and topic
of the discussion. I believe this expanded openness has already reduced
some of the mystery and suspicion about OMB's "regulatory czar"
and the entire regulatory process. While openness is good government,
it has also been a useful tactic in helping shift the public debate on
regulation. The debate is moving away from process toward substance, from
"who met with whom"? to "is this option more cost-effective
than that option?". I believe that is a good development for public
policy. While I am an advocate of more openness at OMB, there are limits
to openness. For example, I have no intentions of compromising the ability
of my career staff to have candid discussions with professionals from
the regulatory agencies. I agree with these leaders in the field of Administrative
Law, such as Supreme Court Justice Breyer that we need more professionalization
of the regulatory process. I am particularly interested in the development
of scientific and technical expertise to accompany legal expertise –
both at OMB and at the agencies.
we have also established more rigorous standards for what we expect from
agencies in the way of regulatory analysis. These tougher expectations
began with stricter enforcement of OMB's existing analytic guidance, which
was crafted by OMB and CEA under President Clinton. In my first six months,
we returned more than 20 rules to agencies for reanalysis; by way of comparison,
this was more than the total number of the returns in the entire eight
years of the Clinton Administration. Once we established that we cared
about analysis, the agencies began to respond and returns have become
less frequent. Believe me, we have much more work to do on analytic quality
but a favorable trend line is apparent. Most recently, we issued a final
revised guidance for regulatory analysis that calls for innovations that
are already commonplace in the academic community. I am talking about
basic things such as cost-effectiveness analysis, formal probability analysis,
and careful consideration of qualitative and intangible values.
have sought to expand the "information policy" function at OIRA
to include the technical quality of information that agencies disseminate
to the public. Following enactment of the new Information Quality Act
in 2000, we expanded OIRA's staffing in science and engineering while
maintaining our historical strengths in economics, statistics and policy
analysis. This new staffing mix at OIRA responds to the changing nature
of regulation: the rise of social regulation -- especially health, safety
and environmental regulation -- and the decline of classic economic regulation
which began in the 1970s. We are now in the process of helping agencies
develop peer-review procedures for technical information, thereby better
assuring quality before release. Agencies have also established formal
correction mechanisms that the public can use to fix poor quality information
that has been placed on agency web sites or written into rulemaking documents.
OIRA sees information policy as a form of quasi regulation -- since government
information affects market decisions. We need greater quality control,
through checks and balances, in the field of information policy.
initiatives making any difference in regulatory outcome? It is too early
to make any definitive assessment of this Administration's regulatory
record. But the preliminary evidence suggests that we are making a difference.
of costly new regulations during this Administration -- measured by major
rules on the private sector or state and local governments -- has slowed
considerably. My staff estimates that this flow, expressed as an annualized
average, was about $8.5 billion under Bush 41 and $5.7 billion during
President Clinton's two terms. (That includes a whopping $12 billion in
President Clinton’s last year.) Note that these figures exclude
“budgetary rules” whose impacts are felt through appropriations.
By comparison, our annual average for the last two years is running just
under $1 billion per year. (By the way, some students of regulation are
surprised to learn that costly regulatory action was greater under Bush
41 than under President Clinton. Please keep in mind that Bush 41 (1)
faced a heavily Democratic Congress, (2) made new major regulatory commitments
under the Clean Air Act and the disabilities act, and (3) had no success
in winning Senate confirmation of a leader for OIRA.) There is no question
that the Bush 43 has been far more selective than previous Administrations
in imposing unfunded mandates on the private sector and our state and
Administration, we have slowed the flow of costly rules without slowing
the flow of inexpensive rules. The total number of federal rules, which
are dominated by rules that do not meet the $100 million-impact threshold,
has not changed significantly. In fact, we do not regard the number of
rulemakings per se as a meaningful performance indicator. We have been
particularly amused by references to the increased number of pages in
the FEDERAL REGISTER that occurred in 2002 over 2001, which some see as
evidence that the burden of federal regulation is soaring. It turns out
that this increase was due almost entirely to the pages devoted to the
Microsoft settlement. We do not believe that page counts in the REGISTER
are meaningful as a performance indicator.
of regulation will notice that, despite the recession that we inherited,
we have avoided the clumsiness of a complete moratorium on new rules.
We are permitting -- indeed encouraging -- agencies to pursue new rules
-- even costly ones -- when they have substantial benefits.
we prompted FDA to add a mandatory label for the trans-fat content of
foods. This rule, begun under the previous Administration, allows consumers
to make more heart-healthy choices while encouraging food processors to
reduce trans-fat content. The longrun result, FDA expects, will be less
heart disease and fewer hospital admissions and premature deaths from
heart attacks. FDA estimates this rule's ratio of benefits to costs to
be about 100 to 1. The rule will cost consumers about $50 per quality-adjusted
life year saved. By way of comparison, coronary artery bypass surgery
and angioplasty cost on the order to $50,000 to $500,000 per QALY saved,
depending upon the patient group.
example is our ambitious rulemaking effort with EPA to slash by 90% the
amount of diesel exhaust from off-road engines used in mining, agriculture
and construction. These gains can only be accomplished through a dramatic
reduction in the sulphur content of diesel fuel and installation of new
control equipment on engines. Although this proposed rule will be costly,
EPA estimates that the benefits -- driven primarily by cardio-pulmonary
gains from less particle exposure -- will outweigh costs by a ratio of
5 to 1 or even 10 to 1.
am encouraged to report that this Administration has begun to exert some
control over major federal regulations, at least those in the purview
of Cabinet agencies and EPA. However, the list of unfinished business
is much longer than the accomplishments. I will offer just a brief checklist
of the most important challenges.
sea of existing federal regulations needs to be renovated. But it is hard
to know where to start! Since 1981 OMB has cleared 36,219 rules, including
1,966 rules that passed the $100 million test. Most of these rules have
never been evaluated to determine if they are working!
As a modest
step toward housekeeping, last year we requested public nominations of
regulatory programs that are in need of reform, pursuant to the “Regulatory
Right-to-Know Act.” Within 90 days, we were inundated with 316 unique
reform nominations from over 1700 commenters. In our Final 2003 Report
to Congress issued last month, we reported what agencies decided to do
with these reform ideas. Fortunately, we learned that 109 of the reform
ideas were already being addressed by agencies. Another 156 reform ideas
were referred to agencies and I am pleased to report that agencies have
decided to pursue 45 of them. We also referred another 51 ideas to independent
agencies for their evaluation. We recognize that this is a modest housekeeping
of look-backs is that we can identify promising opportunities for deregulation.
The DOT’s proposed deregulation of the airline ticketing industry
is a good example where less regulation promises better quality services
and lower prices for travelers. More thought needs to be given to how
regulators, OMB, and Congress should modernize the huge existing stock
homeland security has emerged as a new growth area for federal regulation.
Since 9/11, federal agencies have adopted over 60 new rules as part of
the Administration's homeland security effort, though few of them have
passed the $100 million test for "economic significance." The
new Department of Homeland Security has many new regulatory initiatives
under development, as does the Congress. At OMB, we have been humbled
by the challenge of analyzing these ideas. How should agencies quantify
the benefits of rules aimed at reducing the probability of (or damages
from) future terrorist acts? How should agencies quantify the costs of
homeland security rules, whether they come in the form of time losses
at airports or intrusions into privacy or freedoms of foreign students
and visitors to our country? Quite frankly, the agencies and OMB need
help on how homeland security ideas should be evaluated. We reached out
for public comment on this issue as part of our last Report to Congress
in an effort to promote benefit-cost thinking about homeland security.
Congress is searching for new ways to demonstrate greater political accountability
in the arena of regulation. As you know, many federal regulations -- both
the general area and the specifics -- are specified in statute. Although
legislators may respect what we are doing at OMB, some regard our "smart-regulation"
agenda as too "technocratic;" they believe more democratic accountability
is desired. OMB does not pretend to have answers in this area. I do believe
it is constructive for Congress to begin to ask more fundamental questions
about the role of the Congress relative to the federal agencies and the
courts. It may be constructive for this dialogue to include the independent
agencies as well as the Cabinet and EPA.
As we move
forward with the President’s “smart-regulation” agenda,
I will be seeking your comments – as individuals and as the ABA
– about what reforms make sense. We currently have out for comment
a major initiative on how to promote more rigorous peer review of regulatory
science. Please do not hesitate to schedule a visit to OIRA or drop us
a note on how we can do a better job.
very much for the opportunity to speak today. I look forward to comments