SMARTER REGULATION: OMB'S ROLE
D. Graham, Ph.D.
Administrator, Office of Information and Regulatory Affairs
Office of Management and Budget
Executive Office of the President of the United States
Prepared for the American Hospital Association
July 17, 2002
today, smarter regulation, has been near and dear to my heart for twenty
years -- as a graduate student interested in airbags and auto safety,
as a post-doctoral fellow interested in regulation of toxic air pollution,
as a junior faculty member interested in control of the AIDS epidemic
and as a senior faculty member interested in what Europeans call the precautionary
principle. Indeed, I would be embarrassed to admit how many words I wrote,
how many speeches I gave, and how many numbers I computed that were relevant
to the topic of regulatory reform.
I have both a tremendous opportunity and a very different challenge: how
to stimulate smarter regulation from inside the executive branch of the
federal government. This month marks one year since my confirmation as
OIRA Administrator. This past year has been a busy one for OIRA. I would
like to describe some of the actions we are taking, some obstacles we
face, and some insights we have gathered from increased public participation
in the regulatory process.
start by defining a key phrase. The Bush Administration sees "smarter
regulation" not simply as a slogan but as something very practical: adopting
new regulations whose benefits to the public justify their costs, modifying
existing regulations to improve effectiveness and/or reduce cost, and
rescinding regulations that are outmoded or that should never have been
adopted in the first place. Smart regulatory policy is not uniformly pro-regulation
or anti-regulation; the science and economics may point in very different
directions depending upon the case.
I run at OMB has about 50 career public servants with expertise in policy
analysis, law, economics, statistics and information technology. We have
recently hired additional expertise in public health science, toxicology,
engineering and health economics. These new hires reflect the increasing
importance of health, safety and environmental issues in federal regulatory
Federal agencies issue 4,500 new rulemaking notices each year and, thank
goodness!, only about 600 of these notices are judged significant enough
to merit OMB review. Of those 600, only 50 to 100 each year are considered
costly enough to justify a formal analysis of benefits and costs by the
agency. We do not typically perform original analysis but rather focus
our limited resources on review of these most important rulemakings.
Administration is not allergic to regulation; indeed, we consider it an
essential tool of government policy in conjunction with spending and taxation.
Already, due to the events of September 11th, we have cleared
41 significant new federal regulations covering concerns such as airline
safety, border control and disaster assistance.
oversees dozens of federal regulators, the busiest regulators by far are
the Department of Health and Human Services, the Department of Transportation
and the Environmental Protection Agency. In considering whether the benefits
of rules justify their costs, we expect agencies to consider non-quantifiable
factors, such as fairness, quality of life and privacy, as well as benefit
and cost items that can be quantified and expressed in monetary units.
In my first
year at OMB, my boss, OMB Director Mitch Daniels and I have pursued initiatives
in four areas: openness, promptness, early involvement, and information
quality. Let me say a few words on each topic.
have deployed the OMB web site to diminish the culture of secrecy and
mystery that has surrounded my Office since it was launched early in the
Reagan Administration. By consulting our web site, you can learn which
rules are formally under review at OMB, which rules have recently been
cleared, and which rules have been returned to agencies for reconsideration.
You can even learn about which interest groups have recently lobbied us,
the date of the meeting, the names of the participants, and the specific
topic of the meeting.
does not necessarily make us popular. For example, in the first 6 months
after my confirmation, we returned roughly 20 significant rules to agencies
for reconsideration - more than the total number of returns in the entire
Clinton Administration - and each of the these return letters is a public
document posted on our web site. In six of those cases, we subsequently
cleared improved rules that the agency revised and submitted to us for
reconsideration. Given our demonstrated willingness to critique poorly
analyzed rules, and to do so publicly, we believe we are beginning to
see an improvement in the quality of regulatory packages submitted to
one of the historical frustrations of agencies is that OMB review takes
too long. Although there has historically been a 90-day limit for OMB
review, agencies have sometimes been forced to wait 6 months, a year,
or even longer to get an answer from OMB. We have changed that practice.
I have instructed my staff that no rule will stay longer than 90 days
at OMB without my personal authorization. Result: The number of rules
held at OMB for longer than 90 days has plummeted to near zero for the
last several months compared to the 15 to 25 delays occurring at any time
under previous Administrations. We believe that since agency staff often
toil for years in development of a regulatory proposal, they and the public
deserve a rigorous yet prompt review from OMB.
OMB involvement is underway to increase the impact of OMB's analytical
perspective. We have devised the "prompt letter" to agencies as a new
way to suggest promising regulatory priorities. Our first set of prompts
have suggested lifesaving opportunities at FDA, NHTSA, OSHA and EPA. For
example, we have worked to persuade FDA that priority should be given
to completing a promising rulemaking started in the previous Administration,
a consumer labeling rule that would require food companies to report the
trans-fatty acid content of foods. Trans-fats are now recognized as a
significant contributor to coronary heart disease. OSHA has responded
to one of our prompt letters by notifying each employer in the country
of the lifesaving effects and cost-effectiveness of automatic defibrillators,
a lifesaving technology designed to save lives during sudden cardiac arrest.
And NHTSA responded to our suggestion to apply off-set crash tests to
new cars and light trucks in order to provide superior crash protection
to motorists. The agency issued an ANPRM and will propose a rule on such
tests next year.
we are stimulating a stronger role for science in priority setting by
encouraging early external peer review of technical documents such as
human health risk assessments. We have said to agencies: If you engage
in serious independent peer review of your technical work, you can expect
a more deferential review from OMB. My analysts are also offering some
informal yet early comments to agencies about how to structure a good
regulatory analysis. Think of this revolutionary change: decisions are
sometimes being made after -- rather than before -- a regulatory analysis
OMB's historical "end-of-the pipeline" approach to regulatory review is
not a prescription for large impact. By the time a rule is formally submitted
to OMB, agency career staff and senior management are already invested
in the initiative, which means that any changes we suggest are destined
to make waves, bruise egos and stimulate resistance. Although we must
occasionally use our ultimate weapon to be effective--I mean the dreaded
return letter--we have found that an increasing number of agencies are
becoming more receptive to early discussions with OMB, at least on highly
and perhaps most importantly, we are taking steps to enhance the quality
of information and analysis that agencies use and disseminate to the public.
We recently issued government-wide guidelines that require agencies to
establish minimum quality standards for information that they disseminate
to the public, whether through their web sites or through rulemaking notices.
A key feature of the OMB guidelines is the requirement that formal analytical
results produced by agencies be reproducible, which means that there must
be sufficient transparency about inputs, models and assumptions that a
qualified third party could reproduce the agency's numbers. The enforcement
mechanism in the new guidelines was specified by Congress in statute:
any affected member of the public is permitted to challenge agency information
and request a specific technical correction by the agency.
information-quality law will take effect October 1st of this
year. OMB will oversee agency responses to information-quality complaints.
The new OMB guidelines will create some headaches at the agencies but
we believe the guidelines will ultimately enhance the competence, accountability
and credibility of federal regulation. Third parties - including business,
academia and public interest groups - also need to be aware that the new
information-quality guidelines may set new standards for information that
they submit to the government, assuming that an agency is asked to cite
that information in support of agency policies.
In the economic
arena, we have recently initiated a project with the Council of Economic
Advisors to update our guidelines on proper cost-benefit analysis. Last
updated in 1996, these guidelines govern our reviews of agency rulemakings.
We have asked the public to nominate analytic issues that are ripe for
reconsideration or refinement.
we are reaching out to the public for suggestions on improving the quality
of existing regulations. In our draft Report to Congress on the Costs
and Benefits of Regulation, we asked for public comment on a number of
regulatory issues, including: (1) regulatory programs that need to be
extended, modified or rescinded, (2) issues of regulatory analysis that
need to be refined in OMB's formal guidance documents to agencies, and
(3) ideas for new regulatory priorities that we can suggest to agencies
in the form of prompt letters. This year, we made every effort to publicize
the public comment period, and at the President's request, OMB for the
first time made available an electronic comment form. As a result, we
received more than 2000 comments, compared with 71 comments for last year's
report. We are in the process of reviewing these comments, and our evaluations
of the comments will be published in our final report to Congress and
shared with the agencies. We are pleased that AHA participated in this
process, and I can assure you that your comments will be taken seriously.
the Bush Administration supports federal regulations that are based on
sound science and economics. We are taking modest yet important steps
to improve the quality of federal regulation. Our primary role at OMB
is to undertake rigorous yet prompt regulatory reviews -- reviews that
can be scrutinized by the public. We have also practiced "early involvement"
as a technique to enhance the impact of OMB's analytical perspective.
We have set in motion a longer-term process of improvement in the quality
of information and analysis used and disseminated by federal agencies.
It is too early to assess the ultimate impact of these process endeavors
but my academic instincts tell me that it may produce far greater public
benefit than many pundits appreciate.
for the opportunity to offer these remarks and I look forward to questions,
comments and discussion.