A Paradigm Shift in the Cost-Benefit State

From: RegBlog | Penn Program on Regulation

While this is a time of great political uncertainty in the United States, the next President has a promising opportunity to advance dramatically what has been called the cost-benefit state. A little more than five years ago, in a case called Entergy Corp. v. Riverkeeper, the Supreme Court embraced as “eminently reasonable” the principles for cost-benefit balancing advanced by every president since at least Ronald Reagan to Barack Obama. Against the backdrop of this established administrative practice, the Court reversed a longstanding presumption against cost-benefit balancing, unless it was clearly permitted in the statute, to reading statutory silences or ambiguities as allowing this type of rational regulation.

For over 35 years, Presidents have ordered regulatory agencies—“to the extent permitted by law”—to implement regulatory standards based on cost-benefit balancing. However, only a small minority of statutes explicitly mandate cost-benefit analysis, while a small minority prohibit it. The challenge has been what agencies should do when implementing the large majority of regulatory statutes that are silent or ambiguous on cost-benefit balancing. On the heels of President Reagan’s groundbreaking Executive Order 12291 imposing a cost-benefit test on regulations — and three years before the Court’s famous Chevron v NRDC decision deferring to the interpretation of an ambiguous statute by the U.S. Environmental Protection Agency (EPA) — the Supreme Court held, in American Textile Manufacturers Institute v. Donovan, that the Occupational Safety and Health Administration was not required to engage in cost-benefit analysis in setting “feasible” public health and safety standards. But the Court also asserted in dicta that “when Congress has intended that an agency engage in cost-benefit analysis, it has clearly indicated such intent on the face of the statute.”

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