Towards a Regulatory Budget:
Jim Tozzi, ed. 1979.
Lack of Government-wide Compliance Costs
Federal regulatory programs have developed in response to failures in the Nation's market system. These failures in our economic system have lead to economic and social problems to which only the Federal Government can respond.
Consequently over the past one hundred years a significant number of regulatory programs have been enacted. These programs include, for example, economic regulations aimed at the control of monopolies (ICC and SEC), the protection of the nation's health and safety (EPA, OSHA, CPSC, FDA) and the promotion of equal opportunity for all the nation's citizens (Department of Labor's Employment Standards Administration and the Office of Civil Rights in HEW).
The implementation of these programs has changed the lifestyle of many of our citizens and as a result has improved the conditions under which they live.
The benefits derived from these regulatory programs are not free--we pay more for our consumer products and spend an increasingly greater amount of time submitting information to Federal agencies.
Although there appears to be broad public support of Federal regulatory programs, there is a growing disagreement on the intensity of Federal regulatory programs and the means by which Federal regulatory agencies accomplish their goals.
Herein lies the problem: How do we determine when we have "enough" Federal regulations in a particular area and having done so, how do we determine the best way for implementing these regulations?
Public outcry for regulatory reform has focused on a number of shortcomings in the Federal regulatory process, including:
One might summarize the above arguments by stating that many citizens believe that Federal regulations cost too much, whether cost is measured in the number of hours required to fill out a government form, expenditures made to comply with a Federal regulation or the number of people unemployed as a result of a Federal regulatory action.
Therefore the thrust of this working paper is to begin a systematic, government-wide effort to assess, on a continual basis, the magnitude of the "cost" required to comply with Federal regulations.
Progress to Date
The measures set forth in this working paper are an extension of previous actions taken to provide an analytical and procedural basis for managing the Federal regulatory process.
Management of the Federal Regulatory Process
The President has directed the Office of Management and Budget to oversee the departments and agencies implementation of the Administration's regulatory reform programs.
The major 0MB regulatory responsibility is to ensure implementation of the President's Executive 0rder 12044, Improving Government Regulations. The Order is the cornerstone of the Administration's effort to improve regulatory management and control. 0MB evaluates (1) the clarity of regulations; (2) the opportunities for public comment; (3) the consideration of alternative approaches to the design and enforcement of the regulations; and (4) the preparation of a regulatory analysis.
0MB provides regular progress reports to the President and identifies areas for improvement.
Finally, 0MB works closely with the Regulatory Council and the Regulatory Analysis Review Group to consistent and coordinated attention to the Administration's overall regulatory reform program.
Executive Order 12044
The Administrative Procedures Act sets certain standards for how a regulation is to be developed. However, prior to the issuance of Executive Order 12044, no coordinated management of the regulatory decisionmaking process existed in most agencies. Although budget and legislative decisions had elaborate procedures to ensure effective management control and coordination, nothing similar existed for regulatory activities.
Executive Order 12044 sets out five goals:
Once the President signed Executive Order 12044, agencies developed and published their own implementing procedures and sought public comment. Final plans for implementing the Order were sent to the Office of Management and Budget for approval last fall. To date, 38 agencies have had their final plans approved and 18 independent regulatory agencies were asked to voluntarily comply with the Order.
Pursuant to the authority granted to 0MB in the Federal Reports Act of 1942, each year 0MB staff review approximately 2,000 separate requests for clearance from the Executive agencies. This review process is supplemented by ceilings on the total amount of reporting that can be imposed by an agency in any 0MB has recently decided to change the way it exercises control where it would stop individual reviews and begin to act as a general manager of the process. It will retain discipline over the system by moving toward a more systematic paperwork budgeting system, checking duplication across agencies and auditing agency performance on a periodic basis. The "budget" will be linked to a strong program of decentralized agency responsibility for paperwork-management, similar to what has been put in place in the regulatory area under Executive Order 12044.
Regulatory Analysis Review Group
The President also created the Regulatory Analysis Review Group (RARG) to examine in detail a limited number of agency analyses of regulations with substantial economic impact. This group is chaired by the Council of Economic Advisers and includes in its membership the principal economic and regulatory agencies of government. RARG uses the information supplied by the Calendar of Federal Regulations to help it identify candidates for review. The objectives of this group are to improve the quality of analysis supporting proposed regulations, identify and attempt to resolve common analytic problems among agencies, and assure adequate consideration of less costly alternatives. The group attempts to help agencies do a better job of analyzing alternative approaches to regulation. This is done by developing a cross-section of agency views and submitting them for consideration as a part of the public comment on a proposed regulation. This affords all regulators the opportunity to be aware of and participate in the decisions of other agencies and to contribute their views to better regulatory decisions.
The Regulatory Council
Created by the President in October 1978, the Regulatory Council includes the heads of 35 Federal regulatory agencies. The Council's principal function is to develop and publish the Calendar of Federal Regulations, a synopsis and brief analysis of 100-150 regulations that are likely to have a substantial economic or public impact. It then uses the calendar to help identify the relationship of upcoming rules and develop coordinated plans for dealing with any significant cross-cutting regulatory issue. In addition, the Council undertakes special projects such as reviewing the cumulative effect of regulations on particularly vulnerable industries or sectors.
Regulatory Reform Act
The Administration has proposed enactment of the Regulatory Reform Act. This bill strengthens the reforms introduced by E.O. 12044, makes them permanent, and applies them to the independent regulatory commissions.
Its key elements include:
An Additional Mechanism for Managing the Federal Regulatory Process
Although the aforementioned procedural reforms coupled with the measures proposed herein will allow us to determine how much we are paying for Federal regulations this data by itself will not allow us to determine whether the resultant costs are "enough", too great or too little.
Once the government-wide level of regulatory costs are codified, it is likely that we will receive arguments along the following lines:
If a consensus were reached to the effect that not only is the total cost of Federal regulations too low, but the cost associated with most, if not all, of the individual regulations is too low and should be increased, then the codification of government-wide regulatory costs will have achieved its purpose and no additional actions need be taken.
At this point in time, it is not at all clear that such a consensus will be reached. For this reason this working paper contains some exploratory work on how government regulatory costs could be displayed so as to facilitate debate by all effected parties on any additional measures needed to strengthen the management of the Federal regulatory process.
It is important to note that the development of this "display mechanism" proceed simultaneously with the development of government-wide cost data and that both activities proceed in an expeditious manner.
Failure to make progress on both of these fronts could result in the adoption of regulatory reform measures which could have an extremely deleterious impact on the many economic and social goals achieved by Federal regulatory programs. These measures include:
These are harsh remedies and in part are an outgrowth of the fact that the Code of Federal Regulations has expanded from some 25,000 pages in 1950 to almost 84,000 pages last year. Regulatory agencies are now issuing an estimated 3,000 rules each year, 2,000 of which have a significant impact on State and local governments and the private sector.
For these reasons, this working paper also presents a method by which the management of the Federal Regulatory process could be strengthened without resorting to remedies which, at best, might manage it on a piecemeal basis but without any concern for the cumulative impact of Federal regulations.
The options set forth in this working paper have been developed so as to focus public debate on this important issue of public policy -- the appropriate mechanism for managing the Federal regulatory process.
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