to Congress on the Costs and Benefits
of Federal Regulations
report is to include "recommendations from the Director of OMB and
a description of significant public comments to reform or eliminate
any Federal regulatory program or program element that is inefficient,
ineffective, or is not a sound use of the Nation's resources" (Section
645 (a)(4)). As indicated in the Introduction, we solicited comment
on a wide range of issues related to our discussion of the methodology
we used in evaluating total annual benefits and costs of Federal
regulatory programs; estimates of the benefits and costs of "economically
significant" or "major" rules; and direct and indirect impacts of
Federal rules on the private sector and governmental bodies. We
also sought comment on regulatory programs or program elements that
are "inefficient, ineffective, or . . . not a sound use of the Nation's
we indicated in Chapter II, the current state of knowledge of benefits
and costs of Federal regulatory programs is limited, although growing.
While some aggregate estimates of the benefits and costs of Federal
regulations have been made based on adding the results from various
studies, these aggregate estimates are best viewed as valiant first
attempts to summarize existing knowledge. They may also be viewed
as general indicators of the importance of regulation to the American
people and to the economy, but not as guides to specific regulatory
many difficult methodological problems have yet to be solved, we
presented in Chapter II our own aggregate estimates of the costs
and benefits of regulation to further the discussion and generate
comments that we hope will lead to better estimates. We do not,
however, believe that the existing evidence on aggregate costs and
benefits rises to the level that would support a recommendation
to eliminate any regulatory program. Virtually all of the evidence
discussed above is based either on dated studies of existing regulations
or on estimates for proposed regulations. These data are not appropriate
for determining whether existing regulations should be repealed
or significantly modified because of the sunk cost and rising baseline
problems discussed above. Before supportable recommendations are
made to eliminate existing regulatory programs or elements of programs,
empirical evidence based on analytical techniques designed to solve
the methodological problems discussed above must be developed.
III points out that we also need better evidence for determining
whether proposed regulations are cost-effective and produce the
greatest net benefits. Agencies have had difficulties generating
sufficient data to make these determinations for individual regulations.
In some instances, there are significant technical problems to assessing
costs and, in particular, benefits. In other instances, the ability
of the government to conduct analysis is limited by factors that
direct use of limited agency resources -- for example, statutory
and judicial deadlines -- forcing agency action within time frames
that preclude adequate analysis. In some other instances, it is
not at all clear that given limited financial and human resources,
additional analysis would be useful. Finally, there are occasionally
emergencies that demand swift federal action, where the public expect
their elected officials to respond as best they can without the
delay that careful analysis would entail.
summary, based on our discussion and findings in chapters I, II
and III above, we see three major themes:
estimates of the total costs and benefits of regulation in the
$300 billion (4 % of GDP) range clearly indicate that regulation
is important in providing both health, safety, and environmental
benefits and a well functioning economy.
It is very difficult to draw strong conclusions about how to improve
regulatory policy from macro data on benefits and costs. Micro
data on individual regulations are needed.
Although considerable progress has been made in providing micro
data in advance of regulatory proposals and in developing best
practice guidance, further progress is needed to continue improving
regulatory decisions. Specifically, we need to ensure that the
quality of data and analysis used by the agencies improves, that
standardized assumptions and methodologies are applied more uniformly
across regulatory programs and agencies, and that data and methodologies
designed to determine whether existing regulations need to be
reformed is developed and used appropriately.
improve the quality of data and analysis on individual regulations
and on regulatory programs and program elements as a first step
toward developing the evidence needed to propose major changes in
regulatory programs, we recommend that:
lead an effort among the agencies to raise the quality of agency
analyses used in developing new regulations by promoting greater
use of the Best Practice guidelines and offering technical
outreach programs and training sessions on the guidelines.
An interagency group subject a selected number of agency regulatory
analyses to ex post disinterested peer review in order
to identify areas that need improvement and stimulate the development
of better estimation techniques useful for reforming existing
OIRA continue to develop a data base on benefits and costs of
major rules by using consistent assumptions and better estimation
techniques to refine agency estimates of incremental costs and
benefits of regulatory programs and elements.
OIRA continue to work on developing methodologies appropriate
for evaluating whether existing regulatory programs or their elements
should be reformed or eliminated using its Best Practices
document as the starting point.
OIRA work toward a system to track the net benefits (benefits
minus costs) provided by new regulations and reforms of existing
regulations for use in determining the specific regulatory reforms
or eliminations, if any, to recommend.
and regulatory reform have the potential to do much good for society
or much harm. The key to doing the former is having the information
and analysis necessary for wise decision-making. The steps outlined
above are aimed at continuing our efforts to improve our ability
to make better regulatory decisions.