Jim Tozzi is a legend and a treasure. Who better to reflect upon the history of, the significance of, and the prospects for centralized regulatory review (CRR)?
Tozzi’s previous writings covered much of the history of CRR. In this current assessment, Tozzi (Reference Tozzi2019) makes several important points. The first is that the development and success of the Office of Information and Regulatory Affairs (OIRA) can be traced to bipartisan support, starting with Presidents Kennedy and Johnson and then the push given by President Nixon at the hand of George Shultz (“Quality of Life Review”). Of special mention is the bipartisan commission, which enabled the passage of the Paperwork Reduction Act, and the signing of that Act by President Carter, contrary to the wishes of all his Cabinet members, save his Budget Director.
The question that developed over this period was not whether there should be a major escalation in attempts to constrain the growth and improve the quality of federal regulation, but just how those goals should be accomplished. Almost all serious observers of regulatory activity recognized that agencies were prone to regulate too much and mandate means that were not particularly cost-effective. With regulatory activity growing exponentially, something had to be done.
Several approaches were evident. One was to institutionalize the coordination of agency regulatory activities. In the minds of many, a great deal of waste was caused by duplication of efforts and inconsistencies in approaches. Another approach was the undertaking of strict benefit-cost analyses of proposed regulations by an independent entity. The old Council on Wage and Price Stability as a whole worked on coordination, while its government office, originally led by George Eads, analyzed major regulatory proposals and published their results.
These approaches proved helpful, but not sufficient. Agencies paid a lot of lip service to coordination and improving regulations, but largely went their own ways. What was needed was a firm hand: an entity that could tell an agency “NO” and have that decision stick. Moreover, the entity needed to explain what constituted acceptable regulation and to help agencies understand the standards that would be used to approve or disapprove their regulatory proposals. Serving that purpose was what Order (E.O.) 12291 was meant to accomplish. Office of Management and Budget (OMB’s) staff would utilize its analytical expertise and (later) its new OIRA powers – all under the overall guidance of the Presidential Task Force on Regulatory Relief, chaired by Vice President Bush.
At this point, nothing so comprehensive and superior as a regulatory budget received serious consideration. The notion of centralized review was controversial within the executive branch and was seen by many in Congress to be supplanting the oversight responsibilities and powers to which they were accustomed. What saved the day was President Reagan’s determination to effect “regulatory relief” – one of the four elements of his program of economic reform – and Vice President Bush’s decision to exclude the so-called independent agencies from executive review, a particularly sensitive point with Congress.
As Tozzi notes, subsequent refinements of the program initiated by E.O. 12291 have been made by presidents of both parties. OIRA has been led by persons of great distinction, buttressed by an extraordinarily skillful staff. And despite repeated legal challenges and other efforts to undermine the program (E.O. 21866-enabled), Centralized Regulatory Review (CCR) has survived and served the public well for nearly four decades.
Now may be the time for another significant improvement in federal regulation, however. Most promising would be a full-blown regulatory budget. The benefits of budgeting are well-known. As shocking as it sounds, before 1922, there was no central federal financial budget: agencies proposed their budgets directly to Congress. Today, one would scoff at the notion a financial budget is not needed.
The arguments against a regulatory budget are not compelling. Each argument could be made against the financial budget. The most frequently voiced is, “It’s all about costs, not benefits.” Yes, to a degree, but so is the financial budget. The benefits of spending are discussed and evaluated by Congress, the Administration, and the public each and every year. But surely no serious person would question the aggregating of costs and the setting of priorities that takes place on the financial side. Why not on the regulatory side?
There are complications about which costs to consider, however. Tozzi describes a regulatory budget as “a ceiling on the total incremental cost of complying with regulations…” repeating the language in President Trump’s E.O. 13771. Presumably, this is the cost above what would be experienced in the absence of the relevant regulations. But, what costs actually would be included in a regulatory budget approved by Congress (and the president) each year? The costs already in place plus the truly incremental costs – those that could be added? Or just the latter? A reference to the financial budget may be helpful. “Entitlements” (including interest and suchlike), which presently account for over half of all spending, are included in the federal financial budget but are not “appropriated” each year. Would a regulatory budget include only additional costs imposed by new regulations? What about additional costs imposed by regulations already promulgated but taking effect in the year in question – are these to be treated as incremental costs or treated like “entitlements”?
Whatever the complications, they can be addressed. And the resulting implementation could greatly decrease the cost and increase the utility of the nation’s regulatory program. Perhaps the day will come (in our lifetimes, one would hope!) when we will all scoff at the notion of not having a regulatory budget.
Tozzi makes other points that are worth stressing. His description of a United States Department of Agriculture (USDA) rule increasing the nutritional value of school lunches is to the point: “In this instance, regulators are levying a unilateral de facto tax on the general public to finance benefits to a specific class of program beneficiaries. Why should not the magnitude of the tax be a decision of elected officials on a government-wide basis in a transparent manner in lieu of being made on a case by case basis by unelected officials in an opaque manner?” Which itself is a grand argument for a full-blown regulatory budget.
One can sympathize with Tozzi’s concern over the permanence of the regulatory Executive Orders, especially the “iconic” ones. After all, without these Executive Orders, there is no CRR. But, I demur over his proposal to impede a new president by having to “submit proposed revocations of regulatory-related Executive Orders to the career specialists at OIRA.” A new administration would be foolish not to do so. And a new Executive Order telling a president she or he cannot revoke an existing Executive Order would be foolish. Given the success of modern CRR, no president is going to revoke the regulatory-related Executive Orders.
You have
Access
Jim Tozzi is a legend and a treasure. Who better to reflect upon the history of, the significance of, and the prospects for centralized regulatory review (CRR)?
Tozzi’s previous writings covered much of the history of CRR. In this current assessment, Tozzi (Reference Tozzi2019) makes several important points. The first is that the development and success of the Office of Information and Regulatory Affairs (OIRA) can be traced to bipartisan support, starting with Presidents Kennedy and Johnson and then the push given by President Nixon at the hand of George Shultz (“Quality of Life Review”). Of special mention is the bipartisan commission, which enabled the passage of the Paperwork Reduction Act, and the signing of that Act by President Carter, contrary to the wishes of all his Cabinet members, save his Budget Director.
The question that developed over this period was not whether there should be a major escalation in attempts to constrain the growth and improve the quality of federal regulation, but just how those goals should be accomplished. Almost all serious observers of regulatory activity recognized that agencies were prone to regulate too much and mandate means that were not particularly cost-effective. With regulatory activity growing exponentially, something had to be done.
Several approaches were evident. One was to institutionalize the coordination of agency regulatory activities. In the minds of many, a great deal of waste was caused by duplication of efforts and inconsistencies in approaches. Another approach was the undertaking of strict benefit-cost analyses of proposed regulations by an independent entity. The old Council on Wage and Price Stability as a whole worked on coordination, while its government office, originally led by George Eads, analyzed major regulatory proposals and published their results.
These approaches proved helpful, but not sufficient. Agencies paid a lot of lip service to coordination and improving regulations, but largely went their own ways. What was needed was a firm hand: an entity that could tell an agency “NO” and have that decision stick. Moreover, the entity needed to explain what constituted acceptable regulation and to help agencies understand the standards that would be used to approve or disapprove their regulatory proposals. Serving that purpose was what Order (E.O.) 12291 was meant to accomplish. Office of Management and Budget (OMB’s) staff would utilize its analytical expertise and (later) its new OIRA powers – all under the overall guidance of the Presidential Task Force on Regulatory Relief, chaired by Vice President Bush.
At this point, nothing so comprehensive and superior as a regulatory budget received serious consideration. The notion of centralized review was controversial within the executive branch and was seen by many in Congress to be supplanting the oversight responsibilities and powers to which they were accustomed. What saved the day was President Reagan’s determination to effect “regulatory relief” – one of the four elements of his program of economic reform – and Vice President Bush’s decision to exclude the so-called independent agencies from executive review, a particularly sensitive point with Congress.
As Tozzi notes, subsequent refinements of the program initiated by E.O. 12291 have been made by presidents of both parties. OIRA has been led by persons of great distinction, buttressed by an extraordinarily skillful staff. And despite repeated legal challenges and other efforts to undermine the program (E.O. 21866-enabled), Centralized Regulatory Review (CCR) has survived and served the public well for nearly four decades.
Now may be the time for another significant improvement in federal regulation, however. Most promising would be a full-blown regulatory budget. The benefits of budgeting are well-known. As shocking as it sounds, before 1922, there was no central federal financial budget: agencies proposed their budgets directly to Congress. Today, one would scoff at the notion a financial budget is not needed.
The arguments against a regulatory budget are not compelling. Each argument could be made against the financial budget. The most frequently voiced is, “It’s all about costs, not benefits.” Yes, to a degree, but so is the financial budget. The benefits of spending are discussed and evaluated by Congress, the Administration, and the public each and every year. But surely no serious person would question the aggregating of costs and the setting of priorities that takes place on the financial side. Why not on the regulatory side?
There are complications about which costs to consider, however. Tozzi describes a regulatory budget as “a ceiling on the total incremental cost of complying with regulations…” repeating the language in President Trump’s E.O. 13771. Presumably, this is the cost above what would be experienced in the absence of the relevant regulations. But, what costs actually would be included in a regulatory budget approved by Congress (and the president) each year? The costs already in place plus the truly incremental costs – those that could be added? Or just the latter? A reference to the financial budget may be helpful. “Entitlements” (including interest and suchlike), which presently account for over half of all spending, are included in the federal financial budget but are not “appropriated” each year. Would a regulatory budget include only additional costs imposed by new regulations? What about additional costs imposed by regulations already promulgated but taking effect in the year in question – are these to be treated as incremental costs or treated like “entitlements”?
Whatever the complications, they can be addressed. And the resulting implementation could greatly decrease the cost and increase the utility of the nation’s regulatory program. Perhaps the day will come (in our lifetimes, one would hope!) when we will all scoff at the notion of not having a regulatory budget.
Tozzi makes other points that are worth stressing. His description of a United States Department of Agriculture (USDA) rule increasing the nutritional value of school lunches is to the point: “In this instance, regulators are levying a unilateral de facto tax on the general public to finance benefits to a specific class of program beneficiaries. Why should not the magnitude of the tax be a decision of elected officials on a government-wide basis in a transparent manner in lieu of being made on a case by case basis by unelected officials in an opaque manner?” Which itself is a grand argument for a full-blown regulatory budget.
One can sympathize with Tozzi’s concern over the permanence of the regulatory Executive Orders, especially the “iconic” ones. After all, without these Executive Orders, there is no CRR. But, I demur over his proposal to impede a new president by having to “submit proposed revocations of regulatory-related Executive Orders to the career specialists at OIRA.” A new administration would be foolish not to do so. And a new Executive Order telling a president she or he cannot revoke an existing Executive Order would be foolish. Given the success of modern CRR, no president is going to revoke the regulatory-related Executive Orders.