Regulatory Accounting:

Analysis of OMB's Reports on the Costs and Benefits of Federal Regulation

GGD-99-59: Published: Apr 20, 1999. Publicly Released: Apr 20, 1999.

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Pursuant to a congressional request, GAO provided information on the Office of Management and Budget's (OMB) 1997 and 1998 reports to Congress regarding the costs and benefits of federal regulations, focusing on, for each of four statutory requirements: (1) how OMB addressed the requirements in its reports; and (2) the views of noted economists in the field of cost-benefit analysis regarding OMB's responses in these reports.

GAO noted that: (1) OMB's 1997 and 1998 reports contained some, but not all, of the elements Congress required; (2) OMB provided estimates of total regulatory costs and benefits and provided estimates for some, but not all, $100-million rules issued within particular 1-year periods; (3) OMB's 1998 estimate of total federal regulatory benefits was 12 times its 1997 estimate, driven almost entirely by a 1998 Environmental Protection Agency (EPA) estimate of the benefits associated with the Clean Air Act; (4) however, OMB did not separately assess the direct and indirect effects of federal regulations on various sectors in either report; (5) although it discussed a proposal for electricity restructuring and some previously announced agency initiatives in its 1998 report, OMB did not provide any new recommendations to reform or eliminate regulatory programs or program elements; (6) the cost-benefit analysis experts that GAO consulted were generally critical of OMB's performance, with regard to three of the four statutory requirements; (7) the experts said that OMB's 1998 upper-bound estimate of total regulatory benefits was questionable or implausible and they were particularly critical of OMB's unadjusted use of EPA's Clean Air Act benefit estimate; (8) they also said that OMB should not have simply accepted agencies' cost and benefit estimates for the major and economically significant rules, and should have provided new regulatory reform recommendations; (9) however, the experts said they understood why OMB could do little to discuss the other statutory requirement regarding the indirect regulatory effects on particular sectors; (10) overall, they said OMB should have been more than a clerk, transcribing the agencies' and others' estimates of costs and benefits; (11) several of the experts also recognized that, as part of the administration, OMB was politically constrained from doing more than it did because providing independent assessments would have required OMB to criticize positions approved by the administration; (12) OMB has a responsibility to review agencies' estimates of regulatory costs and benefits in rules and reports before they are published; and (13) however, after their publication those rules and reports become statements of administration policy.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: In May 2000, the Senate passed S. 1198, the "Truth in Regulating Act," which would require the Comptroller General to develop an "independent evaluation" of agencies' analyses of the costs, benefits, and alternative approaches of each economically significant rule at the request of the chairman or ranking minority member of a committee of jurisdiction in either House of Congress. In July 2000, the House passed similar legislation (H.R.4924).

    Matter: It is politically difficult for OMB to provide Congress with an independent assessment of executive branch agencies' regulatory costs and benefits. If Congress wants an independent assessment, it should consider assigning that responsibility to an organization outside of the executive branch. That organization could include a congressional office of regulatory analysis, which would have to be established, or an organization outside of the federal government.


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