Evolving Role of OIRA

Question 1

EO 12291

Answer 1

• first iteration of OMB review
• Reagan admin EO
• required regulatory impact analyses of all major rulemakings + submit to OMB (under this review, reg actions shouldn’t be undertaken unless benefits outweighed costs)
• prohibited agencies from publishing any rules w/o OMB approval
• required executive agencies to perform a cost-benefit analysis for all major rules and centralized the regulatory review process by directing the Office of Management and Budget (OMB) to serve as a central clearinghouse for the review of agency regulations
• think 1st big step in pres oversight of reg process
• revoked in 1993 by Clinton -> issued a modified regulatory review program w/ 12866

Question 2

EO 12866 - General

Answer 2

• Clinton Admin
• continued requirement of econ impact analysis, but loosened the net a bit
• recognized regs as potentially beneficial
• carried over centralized control of process + certain deregulatory bias from Reagan, just dialed back a bit

Question 3

EO - Specific Reqs

Answer 3

• provides that significant regulatory actions be submitted for review to the Office of Information and Regulatory Affairs (OIRA) in the Office of Management and Budget (OMB).
• After Federal Register publication of such an action, fed agency promulgating the action and OMB must make available to public the docs exchanged between them during review
  ->fed agency must identify any substantive changes between the draft submitted to OMB + the published rule + must identify those changes made at the suggestion or recommendation of OMB.

Question 4

EO 12866 - Significant Regulatory Action (Present Def)

Answer 4

Defined by the E.O., generally as any regulatory action that is likely to result in a rule that may:

• Have an annual effect on the economy of $200 million or greater (adjusted every 3 years for changes in gross domestic product);
  -> or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, territorial, or Tribal governments or communities;
• Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency;
• Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or
• Raise legal or policy issues for which centralized review would meaningfully further the President’s priorities or the principles set forth in the Executive order.

Question 5

Changes in 12866 Over Time

Answer 5

• essentially, each Presidential admin has had its own impact, although the broader concept has been largely left intact
• Trump - “pretty significant” + deregulatory direction according to Prof
  -> recission of 2 regs for every new reg promulgated

Question 6

12866 - Biden Admin

Answer 6

• Biden Admin modified the EO with its own EO (EO 14094)
• raised threshold for significant reg action from $100 mill. to $200 mill.
• also indexed that # every three years to account for economic growth (importance of making it proportional to impact on econ, instead of ever-expanding regs to OIRA)
• Biden also trying to increase participation of underserved communities (Section 2(c))
• requires reg impact analysis to include recognition of distributive impact (Section 3(a))
• modernization of comment process -> trying to ensure non-lobbyists get included in meetings (fact of 12866 meetings is public, content is not - Biden trying to expand beyond lobbyists) (Section 2(e))

Question 7

Practical Import of 12866

Answer 7

• q of transparency + greater political accountability (OIRA + WH interactions are shielded from public disclosure)
• OIRA influences outcomes (pressure from WH + outside groups that influence OIRA process)
• adds delay to already lengthy rulemaking process
• anti-regulatory bias

Question 8

EO 12866 + Anti-Regulatory Bias

Answer 8

• (1) OIRA reviews agency regs only to determine whether benefits outweigh costs, in other words to ensure the rule is not too stringent. But reg could also be too lax and CBA might call for more robust response
• (2) OIRA rarely reviews agency decisions to de-reg with the same rigor; OIRA as a roadblock on path or reg not de-reg
• (3) OIRA does not review agency inaction; agency inertia is privileged + many regs that would have positive net benefits are never enacted
• (4) two procedural features of OIRA cut against reg: delay associated with OIRA review (exacerbated by OIRA’s small size) + OIRA’s exemption from constraints of the APA

Question 9

Criticism of Regs

Answer 9

• lack of transparency (a lot of what happens within OIRA is still a bit of a blackbox)
  -> Biden admin trying to address this, bring more people into the meetings
• too much White House control
• process susceptible to pressure from outside
• imposes delay (doing more analysis takes more time -> concern of deregulatory bias)

Question 10

APA and Cost-Benefit Analysis

Answer 10

• APA formally does not require cost-benefit analysis
• BUT still some q as to what role it should play -> agencies need to take a serious look at what they’re doing
  -> question of whether relying on cost-benefit analysis becomes an insurance policy of sorts for a reviewing court (Michigan v. EPA)

Question 11

Michigan v. EPA - Significance

Answer 11

• often cited for the principle that consideration of cost is necessary to establish reasonableness

Question 12

Michigan v. EPA - Facts

Answer 12

• CAA - special rules for hazardous air pollutants -> need to do a study then decide whether regulation = “appropriate and necessary”
  -> this doesn’t say you need to include costs, so EPA doesn’t include them in deciding whether or not to regulate at all, although it does account for them in setting level of regulation
• costs of $9.6 billion per yr of regulation, benefits from the mercury alone would be around $4-6 million, but the rule acknowledges health benefits are difficult to quantify
  -> think Prof said they did an RIA (Regulatory Impact Analysis) - they do calculate all the numbers, but don’t factor them in for whether to regulate

Question 13

Michigan v. EPA - Ruling + Reasoning

Answer 13

• Scalia majority - says unreasonable
• argues relationship between calculating costs relative to benefit is embedded in the word appropriate -> arguing that natural reading of “appropriate and necessary” requires some consideration of costs
  -> saying it’s unreasonable to ignore costs

Question 14

What does Michigan v. EPA mean for admin law?

Answer 14

• follows from Scalia op that you need to do cost-benefit analysis whenever “appropriate and necessary” shows up (reg can’t meet that standard unless you account for costs)
• BUT Prof did say possibility of reading less broadly - Part II.D softens a bit
  -> the opinion technically never uses the term “arbitrary and capricious”, so you could argue it’s just about statutory interpretation of CAA

Question 15

Regulatory Rxn to Michigan v. EPA

Answer 15

• Prof said regulators freaked out
• definition of appropriate sounded important, + ct does cite State Farm
• also dissent - not really disagreeing whether EPA had to meaningfully consider costs, it’s only focusing on fact that they did in fact do so at a later stage
• Prof said many agencies now look at cost-benefit analysis as a sort of insurance policy -> most prudent thing to do (unless statute precludes cost-ben analysis) is to make sure court knows you took stuff into account + it was a decision between different alternatives

Question 16

Statutes and Cost-Benefit Analysis

Answer 16

• Congress still has power to tell agencies not to take cost or cost-benefit analysis into account

Question 17

Reasons for Not Doing Cost-Benefit

Answer 17

• acute impact on small portion of population might not be fully reflected in cost-benefit analysis
• difficult to quantify certain things
• removing parts of delay
• not saying do something illogical, more recognizing significance of problem or impossible to do the analysis in a way that would lead to decision or Congress has already done the cost-benefit analysis + baked it into the statute

Question 18

American Textile Manufacturers - Facts

Answer 18

• 1981
• cotton dust standard at issue - concerned about “brown lung”
• OSHA treats this as a feasibility standard - not required to determine whether costs bears reasonable relationship to benefits -> trying to adopt the most protective standard feasible

Question 19

American Textile Manufacturers - Ruling + Reasoning

Answer 19

• Ruling in favor of OSHA - court reasons agency doesn’t need to balance b/c Congress already set worker health above all factors except feasibility
  -> challengers had tried to argue needed reasonable relationship between costs + benefits, but court rejected that
  -> Congress thought financial impacts of the problem itself were larger than the costs of eliminating the problem
  -> act only requires feasibility analysis, not cost-benefit analysis

Question 20

Am Text Man - Relevant OSH Act Provisions

Answer 20

• Section 6 (b)(5) of the Occupational Safety and Health Act of 1970 (Act) requires the Secretary of Labor (Secretary), in promulgating occupational safety and health standards dealing with toxic materials or harmful physical agents, to set the standard “which most adequately assures, to the extent feasible, on the basis of the best available evidence” that no employee will suffer material impairment of health.
• Section 3 (8) of the Act defines the term “occupational safety and health standard” as meaning a standard which requires conditions, or the adoption or use of practices, means, methods, operations, or processes, “reasonably necessary or appropriate” to provide safe or healthful employment and places of employment.
• Section 6 (f) of the Act provides that the Secretary’s determinations “shall be conclusive if supported by substantial evidence in the record considered as a whole.”

Question 21

Disconnect Beween Congressional + Executive Reqs

Answer 21

• 12866 requires cost-benefit analysis
• means agencies exempt from such analysis by their own statutes still need to do it for OIRA
• Prof discussed issue of whether or not Pres should be able to bring cost-benefit into the equation when Congress has already decided not to -> problem that agency decision not to regulate is very difficult to review

Question 22

Regulatory Impact Analysis

Answer 22

• this is the cost-benefit analysis for OIRA
• lots of economists, statisticians, computer models involved
• so much time goes into this that it winds up impacting agency capacity to promulgate regs
• shortage of gov officials -> wind up relying on consultants + contractors for this (requires econ knowledge + understanding of how stuff fits)

Question 23

Examples of Costs

Answer 23

• regulatory compliance costs (process of understanding the reg)
• lost profits from not being able to do stuff, + lost opportunity from not being able to use that capital
• cost of doing whatever reg says

Question 24

Examples of Benefits

Answer 24

• risk or harm averted
• hard to be specific - often longer term + less certain

Question 25

OMB Circular A-4

Answer 25

• articulation of rules fed gov uses for figuring out how to do cost-benefit analysis
• Biden is updating this
• agencies used to only look at aggregate costs + benefits, vs updates will require looking at different groups of beneficiaries + regulated entities

Question 26

Challenges of Cost-Benefit Analysis

Answer 26

• concentrated costs vs. diffuse benefits
• quantifiable vs unquantifiable benefits
• problem of underestimating qualitative benefits
• regulated community may care about nonquantifiable costs (discretion + freedom - ex of playgrounds)
• distributional impacts
• possibility that costs will be passed to consumers

Question 27

Biden Updates to Circular A-4

Answer 27

• Updating Discount rate to 2%: Benefits of rules happen far out in the future -> they are less valuable (a dollar now is worth more than in the future)
  -> We value money we have now (time preference): High discount rate presumes enormous growth in the future
  -> very important for doing CBA for climate regulation (higher discounting rate means future benefits are diminished significantly)
• Lower income people have higher aversion to risk than higher income people: regulations now must consider this
• Methods for Treating Non-Monetized Benefits + Costs: Regulatory benefits that are difficult or impossible to quantify -> Put these benefits in a table for economists easy reading
• Consider distributional effects (accounts for marginal utility of benefits) - so-called “equity weighting” of benefits: A dollar for a minimum wage worker is meaningfully different than a dollar for Bill Gates -> agencies can weigh dollar benefit to person in bottom quintile 6 times more than person in median quintile and 40 times as much as someone in top quintile (marginal utility of benefits)
  -> Concerns: Equal protection concerns if you correct for distributional impacts on the basis of race, gender, etc. (but income is okay )
  -> Advice does NOT recommend (response to SCOTUS SFFA response: concern of importing SFFA type challenges into regulation)
  -> think in the end, the Biden admin said guidelines to consider distributional effects, but not specifically labeling “equity weighting”
• Analytic baseline: bens + costs of a reg are generally measured against no-action baseline - think Biden updating so analytically reasonable forecast of the way the world would look absent the regulatory action being assessed

Question 28

Any issues with Circular A-4 in light of MQD and Chevron?

Answer 28

• SCOTUS might criticize equity weighting: doing equity weighting goes beyond text of the authorizing statute? (compare to disparate impact analysis? Challenges to Title VII regulations)
• MQD concern: To the extent that equity weighting is a tell that agency is making regulatory decisions on advancing those equity objectives, does that exceed statutory authority granted to agency? Equity weighting might mean agency is advancing objectives beyond that authorized by statute)
• In post Chevron world, are these choices (to use equity) the BEST interpretation of the statute (as opposed to just a reasonable interpretation)
• MQD: Lowering discount rate + adding weights to distributional benefits means that benefits appear super large and susceptible to MQD challenge

Question 29

Biden A-4 Updates - Discount Rate

Answer 29

• discount rate reduced by 33% compared to prior discount rate -> means we’re decreasing future benefits by less (we’re comparatively weighing them more)
• based on economic consensus on appropriate way to measure, but policy wise it’s important for things like climate change
• update seems to shift the approach to this a bit - past assumption was we care more about things happening now, vs. update saying people really do care about the future

Question 30

Biden A-4 Updates Risk Aversion

Answer 30

• Research showing lower income people have a greater aversion to risk than higher income people
  -> Economic literature previously hadn’t been available to support this differentiation, but it is now
• updates say you need to put benefits that are more difficult to quantify in a table (helps economists pay attention)
  -> Otherwise there’s a concern economists won’t pay as much attention to it

Question 31

Biden A-4 Updates - Distributional Consequences

Answer 31

• DOES allow for consideration of distributional consequences
  -> says you can weigh a benefit accruing to a person in bottom quintile almost six times as much as someone in median quintile + almost 40 times more than someone in top quintile
  -> means agencies can look more at who costs are being imposed on + who benefits are accruing to
• BUT Prof also noted some subtle cautions in this section
  -> Recommendations on how to slice and dice the data, but don’t have something saying you should look at racial disparities (in anticipation of SCOTUS decision in SFFA – concern of importing these potential challenges into a potential regulation)
• Consider attributes other than income (race, ethnicity) when consistent with the law – follow other OMB guidance on using this kind of analysis (basically, White House trying to tread very carefully in light of the legal environment)

Question 32

Biden A-4 Updates - Significance for A+C Review

Answer 32

• ex of case following Michigan v EPA (SCOTUS takes another case + says cost-benefit analysis is inherent in non-arbitrary/non-capricious assessment – you need to do this under APA + explain why you’re regulating if costs are higher than benefits, skepticism that the reg can pass arbitrary + capricious review)
• Biden updates cram complexity into cost-benefit analysis –> if SCOTUS says you need to do this, this memo is opening up space to get more complexity in there
• Addressing benefit side of the equation – discount rate, very important for numbers in something like climate change
  -> Equity weighting also debunking the benefits side
  ->Literature tells us this is the more accurate way to capture the impact of your regulation – science on economics on the benefit side has been lacking + we have now evolved to where we have more accurate tools (we’ve gotten better at showing the benefits)