Arguably, the most important legal document of the last 30 years that hardly anyone in America knows about was Executive Order No. 12,291, the Reagan executive order that created the modern system of White House oversight of federal regulatory policy making. The Order required federal agencies other than the so-called independent agencies to submit potential regulatory initiatives to OMB for cost-benefit clearance before they could go forward as actual proposed and, eventually, final rules.
That system, although significantly (and beneficially) amended by President Clinton through Executive Order 12866, has remained largely intact under four presidents so far, with a consequent shift in policy making authority out of cabinet departments and other specialized agencies and into the more intensely politicized White House.
On January 30, 2009, President Obama took two remarkable — and hardly noticed — steps with regard to this process. First, by his own executive order, he revoked some Bush 43 amendments to the Clinton order, which had arguably tightened White House control over regulatory policy, Second, and more important, he assigned the task to OMB, within the next 100 days, to develop recommendations for a potentially thoroughgoing redesign of the entire process. OMB has now solicited public comment on that rewrite, and some of the input is already publicly available.
My own advice to OMB is that OIRA get out of the job of routinely reviewing individual regulations. Instead, it should focus on a role ideally suited to OMB’s place in the bureaucratic structure – coordination. OIRA could lead a series of government-wide efforts to examine on a systematic basis an entire range of federal regulations, across agency boundaries, that are relevant to some particular set of social goals in order to determine whether existing regulations fit together as a whole, whether their distributional impacts are fair, and whether portions need updating (or, indeed, repeal). No single-mission agency can perform this job. The coordination function, urged also in an excellent article by attorney Nicholas Bagley and NYU Dean Ricky Revesz, was mentioned in the original Reagan order on federal rulemaking, but never played seriously by OMB. A good starting model might be the Regulatory Analysis Review Group, which President Carter created in his Council of Economic Advisers.
A number of the comments OMB has received regarding the executive order process tout the importance of cost-benefit analysis. The real question, however, is not whether cost-benefit analysis is useful, but whether OMB should be micro-managing the analytic process that occurs at the agency level. The argument that agencies will regulate excessively or inefficiently left to their own devices – that is, in a more pluralistic policy making environment — rests on a series of dubious and unproven assumptions. It has variously been theorized that agencies left on their own will overregulate in order to expand their resources and aggrandize their authority. They will respond too precipitously to perceived health and safety risks. They will fall sway to ideologically driven bureaucrats. Or they may be “captured” by pro-regulatory forces. But there is no proof that any of these things is systematically the case.
I applaud President Obama’s willingness to launch a thorough reconsideration of OMB’s role in regulatory review, and was delighted to see that the revision is being undertaken with the benefit of both public comment and interagency consultation. This is in stark contrast to the tightly closed process that led to the promulgation of Executive Order No. 12,291 in 1981.
Rethinking the executive order on regulatory review could not occur at a more opportune time. The Bush Administration performance on economic, health and safety regulation was disastrous. President Obama has the opportunity to redesign the role of the White House in regulatory policy making so that OMB becomes a genuine partner to agencies seeking to advance the public interest through wise regulatory initiative.