The record is closed on some 4,000 submissions to OIRA on its proposal to revise Circular A-4 which sets forth the procedures for the economic evaluation of proposed rules. This is the stage where critical decisions are made and are done so understandably with little public participation.
The purpose of this forum is to provide additional information to key decision-makers, in all federal agencies, by providing a public forum where the public may comment on the views set forth in Regulations.gov which were submitted by the public to OMB(OIRA) personnel. In order to share this new information with all relevant decisionmakers within the Executive Branch, who will be contacted by OIRA, we encourage our readers to submit this link https://www.thecre.com/forum8/?p=8371 to their regulators in federal agencies and to their colleagues in regulated industries. No cost consultations are available here.
The relevant database is this entry in Regulations.gov. In order to keep the discussion manageable CRE prefers to identify the topics for discussion. We invite the public to suggest their recommendations for the topics to be discussed by contacting CRE. In the mean time the public is invited to offer their views on the select topics set forth below by using the comment space at the end of this page.
The initial discussion topics are restricted to three subjects covered by OIRA’s request to the public for suggestions to improve OMB Circular A-4 which delineates the process for analyzing proposed rules:
- opportunity cost
- regulatory budgets (Consult this alarming post[ 06/27/2030] also reproduced at the end of this post; also see EPA Should Establish a Prototype Regulatory Budget.
- distributional weights
The Center for Regulatory Effectiveness
The concept of “opportunity cost” is central to CRE comments.
Serious consideration should be given to making sequential revisions to OMB Circular A-4, beginning with one limited to income distribution.[08 22 2023]
An Anonymous Post
This person concludes:
” On page 28, you say “Opportunity cost” is the appropriate concept for valuing benefits and costs,” but you never define opportunity cost.
Here is a draft paragraph: “Opportunity cost” is the appropriate concept for valuing benefits and costs. In economics, the opportunity cost of a choice is the value of the best alternative forgone where, given limited resources, a choice needs to be made between several mutually exclusive alternatives.(1) A regulation will cause affected entities to change their behavior from their current preferred alternative to the regulatory alternative. In some instances the regulatory alternative and the entities’ current actions (or their preferred alternative) are the same. In these cases there are no opportunity costs. However, in most instances, the entities’ current actions will not match the regulatory alternative and entities will experience opportunity costs resulting from their changes in behavior to the preferred alternative.”
A Filing Made by 100 Economists and Experts
This submission states:
” If finalized, these would be long-overdue updates to the economic assumptions that undergird benefit-cost analysis across the federal executive branch, improving the information policymakers rely on to make key regulatory and spending decisions.
In particular, we commend OIRA and OMB for proposing the following key improvements:
Providing more guidance to agencies on incorporating distributional analysis into decisions, including the flexibility to include equity considerations in benefit-cost analysis by using weights that account for the diminishing marginal utility of goods.”
Competitive Enterprise Institute
This submission states:
“Given its invocation of net benefits, it is OMB that should be on board with aggregate regulatory budget constraint. Unknowable costs can only be internalized by a democratically accountable Congress that grapples with tradeoffs among goods and bads, and answers to voters. Experimenting with regulatory cost budgeting rather than entrenching a net-benefit regime that will lead to some as-yet-unreckoned-with double-counting of benefits is one superior approach.”
This submission concludes:
OMB might consider a regulatory budget to be a separate issue from the economic analysis required under executive order 12,866,  but it should not. The regulatory analysis that accompanies a regulatory budget can be viewed as a more comprehensive form of cost-benefit analysis than what federal agencies currently conduct.  It is more comprehensive because benefits and costs are considered in the aggregate over an infinite time horizon. By contrast, traditional cost-benefit analysis evaluates projects as they affect current welfare. Some scholars also recommend regulations be required to pass a two-step test: one based on traditional cost-benefit analysis and a second based on the constraint placed by a regulatory budget.  Such an approach has the benefit of balancing present and future considerations in economic analysis.”
The Business Roundtable concludes:
“Relatedly, a variety of studies have been performed to estimate the “cumulative regulatory burden,” which is driven by both compliance costs and opportunity costs. While these studies vary in their methodological rigor, two of the most robust efforts were studies developed by economists at the Mercatus Center and economists at Cal-Berkeley and USC. The Mercatus study found that regulatory restrictions dampen economic growth by 0.8% per year, suggesting that the cumulative regulatory burden imposed roughly $200 billion in additional costs in 2022.”
GW Regulatory Studies Center
This submission states:
It is a dangerous mistake to graft “weights” onto benefit-cost analysis. Such an initiative would convert the plowshares of health, safety, and environmental regulations into swords that can be used to confer favors on friends and to smite opponents. In the end, however, it will do no one any favors, as we all reap the bitter harvest of rampant rent-seeking.
Commonwealth of Virginia
These comments include:
More troubling still, the revised Circular A-4 urges agencies to “appl[y] weights to the benefits and costs accruing to different groups.” Though the revised Circular identifies the economic principle of diminishing marginal utility as a mechanism by which agencies can quantitatively measure how different groups may be affected by regulations (with benefits or costs accruing to less affluent citizens presumably receiving a higher weight since they derive more utility from each additional dollar of income), it does not limit agencies’ use of weighting outside of that context. For instance, an agency’s decision to assign greater weight to certain benefits or costs based on whether they accrue to a particular racial group would seem to be consistent with both the letter and spirit of the revised Circular and EO 14,094.
This submission states:
Opportunity Cost The opportunity costs to the economy when new regula4ons are created can be tremendous and rarely sufficiently robust. • The basic concept of opportunity cost applies to all new regula4ons. To comply with new regulations, capital and manpower are diverted from productive activities and the economic value of those activities is lost forever. This causes slower economic growth, less economic growth, and the permanent loss of smaller compe4tors who can’t afford the cost of regulatory compliance.
The Center for Progressive Reform
This statement concludes:
While this point is implicit in the revised Circular A-4, OIRA should make it explicit and give it far more emphasis throughout the document. Instead, the revised Circular A-4 continues to insist that formal CBA is “the primary analytical tool used for regulatory analysis.”  While the term “cost-benefit analysis” can mean many different things  and, as elaborated below, there are many ways that an agency can assess regulatory costs and benefits in order to avoid issuing a rule that imposes enormous costs for very little benefit, the term is clearly used in the revised Circular A-4 to describe a very specific type of CBA: a highly formal and technical method grounded in welfare economics and aimed at achieving economic efficiency that attempts to fully quantify and monetize all of the social costs and benefits of a whole range of regulatory alternatives in order to select the alternative that maximizes monetized net benefits. The revised Circular A-4’s continued insistence that this kind of formal CBA should be “the primary analytical tool used for regulatory analysis” is misguided for two reasons.
Relevant Documents Not Included in the OIRA Docket
Special issue: ‘Benefit-Cost Analysis in Low- and Middle-Income Countries: Methods and Case Studies
” Founded in 1920, the NBER is a private, non-profit, non-partisan organization dedicated to conducting economic research and to disseminating research. The funders who currently contribute the most to NBER-based research projects are the National Institute of Health, the National Science Foundation, the Social Security Administration, and the Alfred P. Sloan Foundation.”
“The Chicago school of economics is a neoclassical school of economic thought associated with the work of the faculty at the University of Chicago, some of whom have constructed and popularized its principles. Milton Friedman and George Stigler are considered the leading scholars of the Chicago school.”
“The MIT Department of Economics is a department of the Massachusetts Institute of Technology in Cambridge, Massachusetts. Undergraduate studies in economics were introduced in the 19th century by institute president Francis Amasa Walker, while the department’s Ph.D. program was introduced in 1941.”
Yale Journal on Regulation and the ABA Section of Administrative Law and Regulatory Practice
” Over the next two weeks, we’ll feature a wide range of scholar and practitioner reactions to President Biden’s recently issued Executive Order 14,094 and related draft guidance from the Office of Management and Budget (OMB).”
“For nearly 40 years, the White House has played a preeminent role in the federal rulemaking process, through the Office of Information and Regulatory Affairs (OIRA). And OIRA’s primary tool of oversight, from the beginning, has been cost-benefit analysis.”
“The White House and the Office of Management and Budget (OMB) recently issued major and long-awaited changes to the processes for formulating, analyzing, and reviewing agency rules, delivering on a promise made on the first day of the Biden administration.”
“Regulation magazine was founded in 1977, at an inflection point in the growth of regulation. In the early 1970s, Congress launched a fleet of new agencies such as the Environmental Protection Agency, Occupational Safety and Health Administration, and National Highway Traffic Safety Administration. They were fundamentally unlike the New Deal and progressive “independent commissions” that managed industrial cartels—two of which, the Civil Aeronautics Board and Interstate Commerce Commission, would soon be dismantled.”
“This Regulatory Insight provides a section-by-section comparison between the 2023 draft and 2003 Circulars and a descriptive discussion about major changes in each section.”
The discussion herewith would not be possible if it were not for the foresight of five Presidential administrations, Johnson, Nixon, Ford, Carter and Reagan to institute the centralized regulatory review of regulations.
A Suggestion: Implement a Prototype Regulatory Budget in One Agency
Some fifty years ago when the Quality of Life Review , the precursor to centralized regulatory review, was initiated EPA was identified as the key agency to which the new procedures would apply. EPA responded by establishing an excellent analytical capability which was central to the establishment of centralized regulatory review as a key component of the administrative state. The aforementioned analytical capability continues to this very day and would make an invaluable contribution to the development of a regulatory budget. Consequently why not capitalize on this invaluable asset by initiating work immediately on a prototype regulatory budget for EPA which would provide a basis for an informed public review of the subject?
A key feature of the Prototype regulatory budget would be that its components would be ranked by two alternative ranking systems:
- Conventional benefit-cost analyses
- A distributional weighting of benefits
It should be noted that conventional benefit-cost analysis will continue to play an important–but a lesser–role in federal decision-making with the implementation of a regulatory budget as explained in this article.
From the CRE Inbox
RESPONSE TO QUESTIONS RAISED BY OUR READERS VIA EMAIL
The post-comment process utilized herein was first championed by CRE decades ago and has been the subject of an in-depth analysis by Wikipedia; see INTERACTIVE PUBLIC DOCKET at https://en.wikipedia.org/wiki/Interactive_Public_Docket
We appreciate the numerous emails we have received. However, we would like to emphasize that we do not post the emails we receive. Consequently, if you wish to have the greatest impact you should post your comments on this page. We would like to take this opportunity to express our gratitude to your logging some 500 page views on this page in a twelve hour period.
In that OMB Circular A-4 affects nearly every federal agency, its ultimate content will be the result of input from a wide range of policy officials with divergent backgrounds. The aforementioned individuals place a high premium on a crisp statement of the issues.
In those instances where a respondent has a statement of considerable length, a summary statement should be presented herein and an accompanying document of significant length should be forward to CRE who will take the necessary steps to link the said documents.
In some gigs the most memorable performances are off stage–not on stage.
No; we are not surprised that as of this date there have been no written responses from our readers for public posting on this website. This is not our first time at the rodeo; first, comments made on this page have a long shelf life, second they are very visible, third they are not erasable [including those made by CRE] because our readers might comment on the initial post and finally the subject matter of the comments is restricted to three well defined technical subjects. In addition until we close our inbox, our readers can in a number of instances have their concerns broadcast to our readership without disclosing their names by our addressing their specific concerns in our posts.
No, we have no long term surprise interventions under development or consideration.
OIRA In Absentia
One or more of the readers of this site should review the totality of the record presented herein and present for OIRA’s consideration a revised OMB Circular A-4.
Search CRE Website: Regulatory Budget ( 2180 Posts)
NB While CRE continues to benefit from the emails we receive ( which we do not release to the public), we would like to remind our readership that they may also utilize the ” Leave a Reply” mechanism which follows this post, bearing in mind our comments above at 06/25/2023 )
> It is far to early to give any report regarding our recommendation to initiate any action on a regulatory budget for EPA.