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  • Whither Cost-Benefit Analysis?

    When the Obama Administration appointed Harvard University law professor Cass Sunstein to be the Office of Information and Regulatory Affairs Administrator, many were hopeful that choice signaled the White House would have a “commitment to cost-benefit analysis in regulation.

    Unfortunately Obama Administration actions since the Sunstein appointment have shown anything but a commitment to cost-benefit analysis. Competitive Enterprise Institute’s Iain Murray reports:

    It appears that Obama is rescinding Bush 43′s EOs 13258 (drafted by John Graham) and 13422* in order to revert to Clinton’s EO 12866 (drafted by Sally Katzen). The differences are very subtle, but include the following:

    a. 13258 and 13422 applied OIRA review to guidance documents as well as rules.

    b. 13258 and 13422 required agencies preparing draft rules and guidance docs to “identify in writing the specific market failure (such as externalities, market power, lack of information) or other specific problem that [the rule or guidance] intends to address (including, where applicable, the failures of public institutions) that warrant new agency action, as well as assess the significance of that problem, to enable assessment of whether any new regulation is warranted.” Whereas EO 12866 requires agencies to “identify the problem that it intends to address (including, where applicable, the failures of private markets or public institutions that warrant new agency action) as well as assess the significance of that problem. . . . examine whether existing regulations (or other law) have created, or contributed to, the problem that a new regulation is intended to correct and whether those regulations (or other law) should be modified to achieve the intended goal of regulation more effectively. . . . [and] identify and assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior, such as user fees or marketable permits, or providing information upon which choices can be made by the public.”

    c. 13258 and 13422 require the establishment of a Regulatory Policy Office in each agency to pre-clear proposed rules and guidance docs before they get sent to OIRA.

    The biggest change is that guidance docs will no longer go through the OIRA review process.

    *UPDATE: Previously this post identified Susan Dudley as the author of EO 13422. We have since been informed that Dudley did not arrive at OMB till 12 days after 13422 was issued. Hence she is not the author. We regret the error.

    Posted in Economics [slideshow_deploy]

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