U S Office of Management and Budget Office

U. S. Office of Management and Budget Office of Information and Regulatory Affairs The American Experience in Regulatory Review and Reform Dominic J. Mancini, Ph. D. Office of Information and Regulatory Affairs U. S. Office of Management and Budget A Simple CAP for Europe, a Challenge for All Brussels: October 3, 2006

U. S. versus E. U. Structure v Executive Branch creates regulations, Congress creates laws v Regulations, or Rules, are similar to Secondary Legislation v Laws, or Acts, are similar to Primary Legislation v White House Office of Management and Budget oversight and analytical guidelines apply to Regulations, but do not apply to Laws 1

Regulatory Transparency and Accountability v Administrative Procedure Act v The Act requires that agencies go through a notice and comment process open to all members of the affected public, both U. S. and foreign. v Before agencies can issue a final regulation, they must respond to the public comments, make sure that the final regulation is a logical out-growth of the proposal and the public record, and is not arbitrary or capricious. v The public record is used by the courts in settling any challenge to the regulations brought by the affected public. 2

U. S. Approach to Regulatory Policy v. Centralized Management and Leadership v Emphasizes the importance of and adherence to regulatory principles and procedures. v. Transparency and Accountability v Addresses concerns about undue influence and allows all interested parties to be heard. v. Regulatory Impact Analysis v Contributes to more informed policy decisions and promotes efficiency. 3

Centralized Management and Leadership v Presidential Oversight of Government Regulatory Policy v President Nixon: Initiated regulatory review through his “Quality of Life” program. v President Ford: Required, for the first time, regulatory impact analysis (RIA) requirement for major regulations (over $100 million in impact). v President Carter: Established the Regulatory Analysis Review Group. v President Reagan: Solidified regulatory oversight authority within the White House, issuing Executive Order 11291, which required OMB review and approval of rules. v President Clinton: Issued Executive Order 12866, which focused OMB oversight on “significant” rules and increased the disclosure of contacts with outside parties. v President George W. Bush: Maintained the Clinton Executive Order that requires the agencies to do RIAs and send significant regulations to OMB for review. 4

Centralized Management and Leadership v Role of the Office of Information and Regulatory Affairs v OIRA was established by the Paperwork Reduction Act of 1980, partially in response to the explosion in regulation that occurred in the 1970 s and earlier in the U. S. v As part of the Office of Management and Budget (OMB), OIRA is a central body that has special standing with the agencies. v OIRA manages and coordinates Federal rulemaking, and oversees Federal information management, statistical policy, and information technology policy. 5

Centralized Management and Leadership v Presidential Executive Order 12866 v Executive Order 12866 on Regulatory Planning and Review governs OMB’s oversight of agency rulemaking, requiring OMB review of “significant” agency regulatory actions. v Agencies submit draft significant regulations (both proposed and final) to OIRA for an up-to-90 -day review before publishing them. v OIRA reviews 500 -700 proposed and final regulations per year—those we determine to be significant—out of about 8, 000 that are issued. v About 70 -100 of the regulations reviewed are “economically significant” (over $100 million per year in economic effects). v During our review, we examine the RIA and the regulation and make suggestions to improve both the RIA and the rule’s cost-effectiveness and to make sure that it comports with the Executive Order’s principles and the President’s priorities. v If the agency refuses to make changes or needs more time to make the changes, we can return the rule to the agency for reconsideration. 6

Regulatory Impact Analysis v Applies to Economically Significant Rules v All significant rules still must follow the Executive Order, and must be reviewed by OIRA. v Basic Goals v Maximize net benefits to society—or at least ensure that benefits justify costs. v Promote economic efficiency by regulating only where markets fail, and when regulating, by using cost-effective and market-based approaches. v Increase the transparency of the regulatory system. v Elements of a Regulatory Impact Analysis v Statement of need for the proposed rule that identifies the nature and significance of the problem (e. g. , identification of the market failure). v Examination of alternative approaches to addressing the problem. v Analysis of the costs and benefits of each alternative. 7

The Need for Federal Regulatory Action v Market Failure or Other Social Purpose v Showing That Regulation at the Federal Level Is the Best Way to Solve the Problem v The Presumption Against Economic Regulation 8

Alternative Regulatory Approaches v Informational Measures Rather than Regulation v Market-Oriented Approaches Rather than Direct Controls v Performance Standards Rather than Design Standards v Different Degrees of Stringency v Different Requirements for Different Sized Firms v Different Choices Defined by Statute v Different Compliance Dates v Different Enforcement Methods v Different Requirements for Different Geographic Regions 9

What’s New v Cost-Effectiveness Analysis Required for Health and Safety Rules v Formal Uncertainty Analysis Required for $ billion Impact Rules v Benefits Transfer v 3% and 7% Discount Rates 10

References v Administrative Procedure Act: www. archives. gov/federal_register/public_laws/acts. html#apa v Federal Rulemaking Flowchart: http: //reginfo. gov/Regmap/index. html v Executive Order 12866 – Regulatory Planning and Review (October 4, 1993): www. whitehouse. gov/omb/inforeg/eo 12866. pdf v Fall 2005 Regulatory Plan and Unified Agenda: http: //ciir. cs. umass. edu/ua/Fall 2005/ v Listing of regulations under Executive Order 12866 review: www. whitehouse. gov/library/omb/OMBREGSP. htm v Listing of OIRA’s meetings with outside parties on regulations under OMB review: www. whitehouse. gov/omb/oira/meetings. html v 2005 Final Report to Congress on the Costs and Benefits of Federal Regulations (December 2005): http: //www. whitehouse. gov/omb/inforeg/2005_cb/final_2005_cb_report. pdf v OMB guidance to agencies on Regulatory Analysis (September 17, 2003): www. whitehouse. gov/omb/circulars/a 004/a-4. pdf v Paperwork Reduction Act: www. archives. gov/federal_register/public_laws/acts. html#pra 11

Questions Dominic J. Mancini, Ph. D (202) 395 -7316 dmancini@omb. eop. gov 12