April 28, 2025 • 61 mins
Amidst the flurry of new Executive Orders that launched the second Trump Administration, many questions have arisen concerning regulatory action and executive power. Our panelists will focus on the regulatory analysis guidance of Circular A-4, the role of benefit-cost analysis in regulatory and deregulatory actions, and the 10-for-1 Executive Order. Join us on Wednesday, April 23rd, at 11:30am EST for a discussion of regulatory analysis and administrative law featuring Hon. Susan Dudley and Professor Donald Kenkel, and moderated by Hon. Paul Ray.
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Episode Transcript
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Speaker 1 (00:00):
Regulation after regulation.
Speaker 2 (00:02):
There are pagated regulations that need to be changed.
Speaker 1 (00:05):
One hundred and eighty five thousand pages.
Speaker 3 (00:08):
Our public accountability and transparency.
Speaker 4 (00:11):
There will be no public supports. It's really the best
we can do. There's a regulation that doesn't make any sense.
Why do you keep you.
Speaker 3 (00:17):
Know who wrote the regulatory laws you must comply with.
Speaker 2 (00:20):
Welcome to the Regulatory Transparency Project's fourth Branch podcast series.
All expressions of opinion are those of the speaker.
Speaker 5 (00:32):
Good morning, everyone, and welcome to today's Regulatory Transparency Project
webinar titled Weigh Regulations the Metrics of White House Review.
We're so glad that you're able to join us today.
My name is Libby Dickinson, and I'm the assistant director
with the Federal Society's Regulatory Transparency Project. As a reminder,
all opinions expressed are those of the speaker. Federal in Society.
(00:52):
Our moderator today is the Honorable Paul Ray, who serves
as the acting director of the B. Kenneth Simon Center
for American Studies at the Hair Foundation. You can find
out more about today's moderator and panelists at fedsok dot org,
that ISSOK dot org. With that, I'll hand things off
to you, Paul to getting started.
Speaker 1 (01:10):
All right, great well, thanks Lebby, Thank you all for
joining us. We have a very exciting panel today. Joining
us are two incredibly distinguished panelists who I want to
introduce right away. First is Don Kinkel, who is the
Andrew Dickson White Professor of Economics in the Brooks School
of Public Policy at Cornell. His research and teaching interests
(01:31):
are in health economics and benefit cost analysis. In fact,
he's a former president of Society for Benefit Cost Analysis.
From twenty eighteen through twenty twenty, he served as a
Senior economist and then Chief Economist on the Council of
Economic Advisors. We also are very privileged to have with
us Susan Dudley, the OIRA administrator the George W. Bush Administration,
(01:53):
the founder of the GW Regulatory Study Center, and a
public policy professor at GW. Also is a past president
of a Society of Benefit Cost Analysis. So Don and
Susan are two of the leading authorities in the nation
on benefit cost analysis, and they're here to talk about
tremendously important changes to benefit cost analysis and how they
(02:17):
impact lawyers and litigation. So, first of all a few
remarks just to situate ourselves. Obviously, Trump, the new Trump administration,
has made regulatory reform one of its key policy issues.
That's been visible, probably most of all in doja's actions,
(02:39):
which have received kind of outsized attention in the last
In the last few days, Trump has also reissued many,
I believe, all of his previous executive orders on regulatory reform,
and indeed has doubled down on some of them, including
changing the former two for one order to a ten
(03:00):
for one order, that is to say, requiring the recision
of ten regulations for every new regulation issue. Now, all
those developments have been have grabbed headlines less important or well,
less newsworthy, But equally as important is a reform of
O ANDB Circular A four. Now sometimes people say that
(03:22):
Elira is the most important office you've never heard of. Well,
O ANDB Circular A four is the most important OMB
circular you've never heard of. It's the circular that governs
agency benefit cost analysis, and of course, agency benefit cost
analysis is often the decisive factor in agency rulemaking. In
November of twenty twenty three, O ANDB issued revised guidelines
(03:47):
in Circular A four for regulatory impact analysis, and in
February twenty twenty five, Trump directed OMB to revoke the
twenty twenty three changes. So the panel here is going
to talk about about the twenty twenty three changes, about
the import of the recision of those changes, and the
(04:09):
impact of all those things for lawyers. But first of all,
let me let me ask us a question out to
both panelists, why is benefit costs relevant for lawyers? And
I say that presuming that we have an audience of
mostly lawyers on this on some webinar.
Speaker 3 (04:27):
Thanks Paul and thanks Libya in the Federalist Society for
hosting this. So, benefit cost analysis has had a key
role in regulatory decisions for decades. And when you think
about it, what's the alternative to basing your regulations on
understanding of the likely impacts? Is it, you know, intuition?
(04:49):
Is it who whatever interest group has has the most power.
So presidents since Carter have required agencies to look at
the costs as well as the benefits of their regular
relations before issuing them. So it's an important component of
regulatory impact analysis that we're going to talk more about,
I think today, and the principles for doing it. For
(05:12):
the requirements for agencies to do it is in President
Clinton's Executive Order twelve eight sixty six, So that has
lasted since nineteen ninety three. Successive president has continued to
rely on that, and that requirement is to ensure the
benefits of your regulation justify the costs. Now, a few
statutes require them, you know, many don't.
Speaker 6 (05:33):
But even if.
Speaker 3 (05:34):
It's not explicit in a statute that agencies should base
their decision on looking at costs and benefits, courts are
increasingly expecting them to do that. So, probably most significantly
was Michigan VPA, where the Supreme Court looked at language
that said set regulations that are appropriate and necessary to
(05:56):
protect public health and the environment, and they said that
you can't decide an action is appropriate and necessary unless
you look at the cost relative to the benefits, So
that weighing of costs and benefits is important. In fact,
cass Sunstein has written about the cost benefit state that
we are now in a state where courts and agencies
(06:16):
and even Congress is expecting it. Now, as we'll talk
about some or many of Trump's actions are norm defying
and disrupting. But with respect to the requirement that agencies
conduct regulatory impact analysis and the role for benefit cost analysis.
Speaker 6 (06:34):
He has retained long standing practices.
Speaker 4 (06:38):
Yeah, I already like Susan's first comment that if not
benefit cost analysis, how do you make decisions? I mean,
whenever I get into these conversations, that's you flip a coint.
I'm not really sure what the alternative suggestion is. But
you know, benefit cost analysis is a tool that developed
by economists and legal freshmen as well. You know, from
(07:00):
the economic perspective. It's a tool to evaluate whether regulations
fix market failures and improve economic efficiency. And what's really
nice there is that it's a it you know, it
looks at both the costs, because sometimes fixing a market
failure can be very costly, and you have to balance
that with the benefits of fixing the market failure, and
you also have to think about all the possible unintended consequences.
(07:24):
And benefit cost analysis provides this really nice systematic way
to you know, put all those impacts together in to
a framework to say, well, are the benefits greater than
the cost? Is this an improvement in economic efficiency? And
I think we'll be kind of coming back to that
over and over, But I mean the broader context of
(07:45):
exactly how they plays out in different you know, with
the executive orders and through Ohira and everything. I think
Susan is already spoken well too, so I'll stop.
Speaker 1 (07:57):
Well, thank you both. That's that's very helpful. One question
I have for you following up on that is one
lesser discussed part of the ten for one executive order
is a regulatory budgeting provision. This carries forward a provision
from the twenty seventeen two for one order. So what
role of any this benefit cost analysis play in the
regulatory budgeting world?
Speaker 4 (08:20):
Right? I mean, yeah, it's the executive orders became known
but is known as the ten for one rule, just
like in the first Trump administration was the two for
one rule, and you said double down. I guess that's
put tupling down, actually, isn't it. But the look counting
up the number of new of old rigs that have
(08:41):
to be deregulated for every new one. That's one way
to think about these rules. But you know, the regulatory
budget is really I think that the heart of that rule,
and that says that any has some kind of a
regular rule requirement on what total costs of all new
regulations and deregulations on net that creates the economy. And
(09:07):
in the first Trump administration, the first year was it
should have no net cost, zero net cost. In the
new rule, the ten for one rule actually said it
should be significantly less than zero, so net cost savings.
And so that certainly shows you, well, you know, obviously
part of the cost benefit analysis is there, you're looking
(09:28):
at the regulatory cost. But what is also really key
is that again both the first and now the second
Trump administrations, the guidance documents very clearly require that this
is conducted together with the benefit cost analysis of every
(09:49):
regulation and every deregulation. And so it doesn't supplant, it
doesn't remove those requirements. It just adds to those requirements.
And now this gets you you have to get your
head around it for a second. Now, how do you
do a benefit cost analysis of a deregulation. Well, the
benefits are the cost savings, the regulatory cost removed because
(10:11):
you've taken away this regulation. That's the benefit side. And
now the cost side of deregulation is that we're giving
up the benefits that the regulation used to create. So
presumably even if it's a regulation or a deregulation that
passes the benefit cost test, there's still typically opportunity cost
(10:31):
of hey, we're giving up some public good that was
created by this regulation, but it wasn't. It didn't justify
the cost of that regulation. So it's kind of the
flip side of say a regulation doesn't pass the benefit
cost analysis, a deregulation does cost pass the cost benefit
and benefit cost analysis. Now, at the same time, you
(10:52):
can't just sort of put negative signs and flip everything over.
The agencies have to conduct new analyzes to see, you know,
given the currents status of the world, given new data,
new evidence, does it look like this regulation or this deregulation,
are the cost savings actually greater than the benefits? So
(11:14):
that that's how they're layered on top and you know
that this is one of ways where I guess, especially
in the first Trump administration, that this I don't know
if it was exactly an ever quite you know, norm busting,
I mean actually ever since the Carter administration, the car
Administration's Council of Economic Advisors started a conversation about regulatory budgeting,
(11:38):
and it's been used in a lot of other countries.
Canada and the Netherlands, Denmark and Norway and so in
the UK as well. What it's been tricky, I think
is sometimes it's the totality of regulatory costs. It is
so large that the idea of saying, okay, here's a
(12:01):
regulatory budget, here's totally how much cost the regulations can
impose on the economy. That measurement problem has shifted their
attention to what referred to as an incremental budget regulatory budget,
and that is, Okay, we're not quite sure how much
cost are out there, frankly, but we can say something
about the new cost being created by new budget, by
(12:22):
new regulations, and the cost savings created by old by
deregulating old regulations. And so that's that's how this regulatory
budgeting is working. As an incremental budget, that yeah, renal
regulatory budget, and you know there's some tension. I mean,
I can certainly imagine that with benefit cost analysis, I
(12:44):
mean they're the directive to find regulations to cut and
to save. I mean that could be implemented by path
by deregulating taking away really good regulations, but and by
growing good I mean regulations that have benefits greater than costs.
But when you combine it with the running the benefit
(13:06):
cost analysis of the deregulation as well. Uh, that should
keep that from happening. And it also addresses this concept
which this problem that a lot of people have noticed
that you know, they of cumulative regulatory burden, which again
that dates back to the President Clinton's executive order as well,
(13:26):
that you know, agencies should be considering about the fact
that they're laying layering but regulation over regulation, but a
lot of times one at a time, benefit cost analysis
of one regulation doesn't really capture that. So that's a
that plus also a retrospective review. It really forces the
agencies that now doge to look at the body of
(13:49):
regulations and try to figure out, you know, which ones
might be a good target to deregulation and generate cost savings.
Speaker 3 (13:58):
Yeah, excuse going if I just jump in and add something. Yeah,
because I think that's all right. In an ideal world
where we had perfect information about consequences of our government
actions and perfect incentives to maximize public welfare, benefit cost
analysis on its own might be sufficient, and a regulatory
(14:20):
budget might seem unnecessary and wrong. But neither of those
are two. We don't have perfect information and the incentives
aren't necessarily always in the public interest. So you know,
agencies incentives maybe you know, they tend to have tunnel
vision and focus on their particular issue and therefore think
that the benefits are much bigger and discount the costs.
Speaker 6 (14:43):
So I think it does address that.
Speaker 3 (14:46):
And as Don said, if and this isn't an ideal world,
it would provide an incentive to actually look at the
regulations that are in effect and determine whether they're act
achieving the benefits that we predicted. We tend not to
do that. We tend always just to predict new benefits
and then move on to the next regulation. So, just
(15:09):
to supplement what John said about that a regulatory budget
isn't necessarily anathma to the requirement for benefit costs analysis.
Speaker 4 (15:20):
I'm also point the regulatory budget doesn't have to be
less than zero. And as a matter of fact, the
Executive Order says that in future fiscal years. When I
said it was significantly less than zero, you know, cost reduction,
that was for fiscal year twenty twenty five. The Executive
Order specifically says in future fiscal years, OMB will tell
(15:40):
agencies what their target is, and that target could say
positive regulatory costs are warranted given what's on your regulatory agenda.
Speaker 1 (15:52):
And to Membory serves, in the first From administration, there
were in fact agencies that in given years had positive
regulatory budgets. By the way, I should apologize, I'm gonna
be sneezing a bit here. Uh for those of us
with allergies, we can we can verify T. S Eliott's
line that April is the coolest month. So thank you
all for for bearing with me.
Speaker 3 (16:12):
I think Paul you introduced us, but we should clarify
that you were a wire administrator during the first Trump administration.
Speaker 1 (16:19):
So yes, that's that's true.
Speaker 6 (16:20):
That regulatory budget two, Yes.
Speaker 1 (16:23):
That's that's right. So uh yeah, So that's all extremely helpful.
Now let's talk a bit about Circular A four, which
is which is the heart of of of the debate
that we're here to talk about. So what is Circular
A for and and what's his provedance? Susan, you're pretty
(16:45):
well set up to talk about that.
Speaker 6 (16:48):
Yeah.
Speaker 3 (16:48):
I liked your your opening comment about it being perhaps
one of the most important circulars that that you haven't
heard of. I think more people may be a part
of it.
Speaker 5 (16:57):
Now.
Speaker 3 (16:58):
So it was first issued in two thousand and three
in the George W. Bush administration, but that circular was
built on guidance that had been from the Reagan and
then Bush and Clinton administration, So each of those administrations
incrementally built built on the earlier administration's guidance. What made
(17:22):
it a circular is it went through notice and comment
and peer review, so that was a part of it.
So the focus of the previous guidance and the circular
was on net social benefits, that economic efficiency lens that
Don talked about just now. So why it's topical right
(17:45):
now is that in twenty twenty three, the Biden administration
revised it, also going through notice and comment and with
the goal to They talked about it being a modernization,
that the circular is twenty years all that needed modernizing,
and some of the changes I think were worthwhile and appropriate,
(18:07):
but it also in other places their concerns were raised.
I'll use the passive voice because it was a dramatic
shift from that economic efficiency lens and the traditional goal
of benefit cost analysis to provide a transparent accounting of
what we know about the consequences of regulation, the benefits,
(18:32):
the costs, the intended the unintended, and then allow policy
makers they don't need to make their decision based on
the option that looks like it has the net benefits.
There may be other factors, but that that's what the
RIA should should provide them. So Ohira received a lot
of comments and including a letter from all the former
(18:55):
presidents of the Society for Benefit Cost Analysis, of which
Don and I I are in that club, and we
raise concerns about that. You know, we made that point
that some of these are worthwhile, but there are other
changes that that really do move regulatory analysis and benefit
(19:16):
cost analysis away from its traditional purpose.
Speaker 4 (19:22):
Yeah, I'll check that. I also mentioned, just as someone
who's taught benefit cost analysis for many, many years, I
really loved the old the two thousand and three Circulary
fourth I was a great document. The textbook I was using.
I actually used an option of actually having that sort
of included in the textbook as an appendix, and I
would constantly refer to the students saying, so, you know,
(19:44):
here's how the textbook is saying, and basically the exact
same thing is being said in Circulary for and then
again this twenty twenty three revision did a lot of
good things. I mean, you know, the idea of modernizing
makes sense, and I think also to some extent, I
know a lot of people from the agencies in Ohira
(20:04):
worked on it. It helped, you know, just sort of
incorporate some things they realize would be useful guidance just
from two more decades of experience doing benefit costs analysis
of regulations. But the shift really was quite fundamental of
this idea that the economists had a very big question,
(20:26):
I think, you know, does it economic efficiency? Does a
regulation improve economic efficiency? And in that it's very specific
that you know, we're using very very precise definition of
what we mean by economic efficiency, and it boil was
down too well. Virtually every real, real world regulation is
going to have winners and losers, and the question comes
(20:49):
down to, you know, can the winners at least potentially
could the winners compensate the losers so everybody'd be better off?
And that's the same thing as saying are the benefits
greater than the cost? And that's the question about economic
efficiency that traditional standard benefit cost analysis addresses. But notice
that it doesn't say anything about who wins, who wins,
and who loses in that, and that's always been noted
(21:13):
as a limitation of benefit costs analysis, and you know,
the seminal works in the academic works say, yeah, we
don't think that's an unimportant question. In fact, we think
sometimes it might be the most important question. It's just
not a question that economists have expertise in terms of
the value judgment is how do you make that trade offs?
(21:35):
You know, how do you decide when this is important
enough to go past the uh the economic have an
an economically inefficient policy that is still worthwhile because it
achieves these other objectives like improving the distribution of income
or addressing racial justice social justice issues. And the twenty
(22:00):
twenty three revisions took a very specific approach to answering
that question, which is again actually very old, and benefit
cost analysis recent research, and it really moves from this
narrow question of economic efficiency to this much broader question
of social welfare. Will this change improve social welfare? And
(22:24):
in particular by making things more equitable? And to judge that,
they introduced the idea of distributional weights. Weiting a benefit
or cost based on the income level of the person
getting the benefit or receiving the cost. And they have
(22:45):
a very precise formula for it. They have a very
precise parameter value to plug into that formula, and what
it results in is weights that would say that like
a dollar to someone in the lowest income quintile is
worth like forty times more than the dollar to somebody
(23:06):
in the top income quintile, and that could therefore justify
a regulation that totally fails economic efficiency. In fact, you
could have like ninety five percent loss of economic efficiency
in the sense of you know, imposing cost on the
(23:26):
rich and giving them to the point giving benefits to
the core. But this weighted benefit cost analysis would conclude
this such a regulation does improve social welfare, and you know,
there's there's return to the sort of the the I
guess humility of economists hopefully we have is that we
(23:48):
can judge the regula the benefits that whether the benefits
of the costs in general outweigh whether the benefits out
weigh the costs or vice versa. But making the value
judgment there and it's also I think, by the way,
sort of very non transparently putting a value judgment in
a formula of being used by analysts that the agencies
(24:11):
is not the best way to make that decision, and
so it's better to if you know, we think we
can the economists now and saying we think that we
can provide, you know, evidence on the efficiency of a
regulation and then let democratically accountable decision makers weigh these
other factors with this, and so our regulars, we hope,
(24:34):
we know, provide useful information, but we don't make the decision.
Speaker 3 (24:39):
Reject on that point, I think that one thing economists
can do is maybe look at the benefits and costs
by different groups. So you can definitely provide decision makers
information because you certainly wouldn't want to pursue a regulation that,
even if it had huge net benefits, that benefited the
wealthiest individuals and harm the lowest income individuals. But that
(25:04):
actually often does happen.
Speaker 1 (25:05):
Regret.
Speaker 3 (25:05):
You know, regulations can be quite regressive. So that kind
of information is really valuable and economists can do that.
But as you say, it's the embedding of those values
in what should be a transparent analysis is what the
problem is.
Speaker 4 (25:23):
Yeah. Absolutely, I think if the revisions in twenty twenty three,
I think they did circularly four, I think they did
do a good job of emphasizing the economists can do that,
the agency should be talking about the distribution of benefits
and costs much more than they do. They just stopped there.
I would have been all on board, but when the
next step is when they lost me.
Speaker 6 (25:47):
Yeah.
Speaker 1 (25:47):
So one point that both of you have made, I
think it's a really important one, is that benefit costs
analysis was never meant to be a kind of a
kind of policy algorithm where you put in the right
numbers and out pops of policy and you just you know,
you you the agency just sort of follow the guidance
(26:08):
of the algorithm and making policy. Rather, it was meant
to be a tool that that equips policymakers to make
sound political judgments. That's what I hear both of you saying. So,
you know, some sometimes there's a there's a uh, there's
this criticism benefit cost analysis that it's that it's a
kind of uh it's a it's it results from a
(26:30):
kind of uh default, from from policymakers to to to
bureaucratic decision makers employing employing some sort of algorithm. But
I what I hear you both saying is that just
to the contrary, benefit cost analysis is what allows policy
makers to make informed decisions that effectuate their their policy goals.
(26:54):
Is that Is that a fair way to put it?
Speaker 4 (26:57):
Absolutely, I'm kind of smiling. My own history of teaching,
I think the first couple of times, when I was
a very young assistant professor, I more or less told
students it was an algorithm, and experience, both with teaching
and with thinking more harder about it made me realize that, Yeah,
benefit cost analysis can't be an algorithm that you just
(27:18):
plug into a computer, but it informs helps helps decision
makers make more informed decisions.
Speaker 5 (27:26):
Yes.
Speaker 3 (27:26):
Sally Katson, who was a WIRED administrator in the Clinton
administration and the lead author of the executive order that
still guys today, she often says it's informative, but not
just positive.
Speaker 1 (27:38):
Right, And that was certainly my experience as well. Yeah.
So we've talked about a couple of similar moments in
the history of Circular A four almost two thousand and three,
almost twenty twenty three, but another, surely February of twenty
twenty five, when the President directed OMB to revoke the
(27:59):
twenty twenty three amendments and go back to the two
thousand and three amendments, a version rather now there's been
a criticism of of that directive that it basically that
it pre judges what the standards should be for for
(28:21):
benefit cost analysis, when in fact, the statute under which
Circular A Floor operates, that's the Regulatory Right to Know Act,
requires requires peer review for those standards, and there's peer
review in two thousand and three, there's peer review in
the twenty twenty three. Well, I guess I forgive it
(28:43):
was late twenty twenty two or early twenty twenty three,
but peer view that resulted in the in the in
the in the issuance of a November twenty twenty three amendments.
But there's but there's not been peer review of the
of the recision going back to the two thousand and
three versions. So I came to hear your thoughts and
(29:03):
whether peer review was statutorially required toyeer back to the
two thousand and three and then it's whether, regardless of
what the required by statue, whether it would have been
a good idea to seek peer review.
Speaker 3 (29:17):
So we're not lawyers, Paul, so we may come back
and ask you that say, what do you think about
that same question? But I'll give you my non lawyer
answer and that is that the peer review.
Speaker 6 (29:29):
Really didn't support some of these key changes.
Speaker 3 (29:32):
So for example, that waiting the peer review did not
support that, it did not support a very low discount rate,
which maybe don can talk more about if people are interested.
So there were several aspects of it. Some of the
ones that I think this is the former presidents of
the Society for ben but Cost Analysis, several of whom
(29:53):
were peer reviewers, by the way, raised in our letter
and in their comments. So the Trump administration asked me,
which they did not. I think they could have, and
maybe they still could say, we actually looked at all
the comments you received and the peer review feedback that
(30:14):
you got, and we think that supports the two thousand
and three version more than it supports the twenty twenty
three version. So I think that would not require a
new notice and comment period and a new peer review,
because I think the existing one really does support the
old version more than it does the new version.
Speaker 4 (30:35):
Yeah, I don't think I have to have much to
add to that. I mean, I would. I agree that
it was quite disappointing to see the final version of
the twenty twenty three revisions, and though as I sort
of read all the peer review comments and as well
as the public comments like I submitted, I realized that
(30:58):
I was not in the minority that a lot of
people experts more expert than I am, can agreed with
a lot. We agreed on a lot of points, and
a lot of those points disagreed with the final version
of the twenty twenty three circulary for the distributional weights
was one of choosing a single relatively low discount rate
(31:22):
was another one where you know, that could have a
huge impact the issue about whether benefits should be counted
globally versus just domestic benefits. The guidance there, I think
was again, you know, sort of treating that as a
more cut and dried issue than it should be given.
(31:44):
You know, sometimes the statutes are pretty clear that US
laws are designed to improve the welfare of US citizens
or US residents, usually not just citizens. But and yet
that doesn't really follow through some of the A four guidance.
And so those two things alone, by the way, the
discount rate and the global versus domestic that those basically
(32:07):
drove the difference between the Obama and early years Biden
administration's estimate of the social cost of carbon, which is
like forty dollars a ton, and then in the first
Trump administration when they recalculated it using the guidance consistent
with the two thousand and three clear A four which
(32:28):
was in place at the time, the social cost of
carbon drops to seven dollars a time. So it's you know,
these sort of art might seem like arcane. Differences can
lead to very big differences in a key estimate like
the social cost of carbon or right social cost of
greenhouse gases, because those drive so many environmental and energy policies.
(32:52):
And yet in that circular Afour revision, they didn't fully
really incorporate a lot of for key comments made by
lots of the peer reviewers.
Speaker 3 (33:07):
Yeah, and I'll just to be Devil's advocates, because we
don't have anyone anyone on this call who is a
strong supporter of the revisions. As I say, I think
both on and I and a lot of people did
like some of those revisions, but it's a few very
important key things that we raise concerns about. So I
think the supporters would say, yes, they did listen to
(33:27):
peer review, and they did pay attention, and they did
make changes. If people are interested in diving into that more.
You can obviously look at the peer reviewers comments, there's
a packet of those, but of one of the peer
reviewers and also a former president of the Society for
Benefit Cost Analysis and editor of the Journal for Benefit
(33:48):
Cost Analysis, he did a comparison. He looked at all
the peer reviewers' comments, quoted from them and compared that
to the final and the title of his paper is
consensus ignored. So he certainly found that they did not.
And that's available as a working paper on Society for
(34:10):
Benefit Cost Analysis website and we'll be published soon in
the journal.
Speaker 1 (34:14):
Well that's that's there. Almost really helpful. Thank you both.
Don Actually, my next question was going to be, uh,
could you could you give some illustrations of the kinds
of regulatory policies that are of the way the difference
between the two and three twenty three versions might might
(34:36):
shape the discussion of different different policies. But I think
you're your point about the social culture carbon is right
on point there. So you know, I'm not a panelist,
I'm really the moderator, but that I will say, and
I you know, I think that the provision of the
regulatory right to no acts that's in question here is
(34:56):
It's quite short, as I'll read it to you. The
Director of the Office of Management and Budget shall provide
for independent and external peer review of the guidelines and
each accounting statement and associated report under this section, and
then some other language it's not relevant here. So the
requirement and the Regulatory Right to Know Act is to
provide for independent and external peer review of the guidelines. Now,
(35:21):
to my mind, that leaves open quite a bit of
discretion on the part of the ob directors as to
how to provide for such review. And one way I
would think of doing so it would be to as
as Susan suggested, to look at the comments that were offered,
(35:43):
you know, just just a couple of years ago on
the two thousand and three version and the proposed changes
to it. I would think that those comments would would be,
you know fully as informative of of the recent decision
to go back to the version, as they as they
(36:05):
would have of the decision to go forward with the
twenty twenty three versions. So I'm inclined to think that
that satisfied satisfies the regulatory Right to no requirement. But again,
I'm not a I'm not a panelist here.
Speaker 3 (36:18):
So Trump administration need to say they did that, so
the Director of OE would be simply revoked the circular
pursuant to presidential memo or or executive order.
Speaker 1 (36:33):
Yes, that's that's right. So the administration did not expressly
state that that's right. I think that's where it's worthwhile
stating that. So, I guess I want to open it
up for either don or Susan to offer any last
any last thoughts here before turning to the audience for
(36:53):
a questions that we have a number of questions already
already lined up.
Speaker 6 (36:58):
Yeah, let's go to the question.
Speaker 1 (36:59):
Yeah, all right, right, let's time to do here. All right,
So from Rick Belzer, we have the main alternative to
benefit cost analysis is benefit cost analysis run by special interests,
and he says that that's what the twenty twenty three
(37:21):
revision legitimized. The question remains, will Ohira staff be empowered
to enforce the two thousand and three edition of Circular
A four. So it's a it's a question about the
practical realities of a liar review in the second trend administration.
But so let's begin to answer that question by talking
(37:44):
about what Ohira's role implementing circularly for traditionally has been
so Susan, you're the natural that for that question.
Speaker 6 (37:53):
Either I am or you are, you can sell them.
Speaker 1 (37:56):
I'm also happy to do that.
Speaker 3 (37:57):
Yeah, you know, worked with a similar with deregulatory order
and initiatives.
Speaker 6 (38:04):
Yeah.
Speaker 3 (38:04):
Why are wear several hats in the review excuse me,
in the review of regulations, both proposed and final regulations,
and one of them is what President Obama called providing
a dispassionate and analytical second opinion on agency actions. And
that part really does try to hold agencies analysis supporting
(38:26):
their regulations, especially their regulations that are likely to have
impacts either benefits or costs of one hundred million or
more in a year to the requirements of circulary for
and the principles of that executive order. The other two
hats are coordinating across agencies and so that also provides
(38:48):
external to the issuing agency input on what the impacts
of their regulations are and maybe whether there are better
alternatives to achieve the goals, and then also accountability within
the White House. So AUIRA is a staff of career professionals,
a small staff, we might add about fifty career professionals,
(39:09):
but they are part of the executive office of the
President and so they do work closely with the policy
officials in the White House. So it adds that presidential accountability.
So to Rick's question, will does that presidential accountability mean?
Can that overrule what a benefit cost analysis might say.
(39:33):
Perhaps it wasn't in my experience when I was a
WIRAY administrator at the end of the Bush administration, that
did not happen a lot. But when it did, the
wira's staff recognized that the president is elected and we're not,
and so sometimes that makes sense.
Speaker 1 (39:50):
Yeah, I'll just add that, you know, olira's regulatory review
function is purely a creature of presidential directive. AIRA itself
exist because Congress created and statute, but it's regulatory review
function is purely a function of executive order. And that's
important because I don't think it's possible to conceive of
(40:14):
effective regulatory review other than as a that is flowing
from the directive of the president. At the end of
the day, the agencies are well, they're accountable to many stakeholders,
but at the president most of all, and appropriately in
my judgment, and so any kind of regulatory review that
(40:36):
stem from some source other than the president is just
going to be I think, likely to generate into a
kind of box checking exercise. Right, the agency may feel
obligated to comply with due to statutory requirements, but it
wouldn't actually inform agency decision making. But if it costs
analysis is likely to inform agency decision making in practice
(40:57):
only if agencies think the president and his top leadership
think it should. Right. And so it's to my mind
very important that OHIRA is a White House office and
not some other some some other agency in the in
the federal system.
Speaker 3 (41:13):
Uh.
Speaker 1 (41:13):
And and that historically it's had it's had the support
of the president of the West wing and enforcing the
requirements of a view of twelve AY six six with
respective benefit cost analysis. I think Susan's right that you
can imagine a situation in which the president's priorities are
(41:35):
are so either predetermined or urgent that it doesn't leave
any space or or benefit cost analysis. And I think
it's I think it's too early at this point to
know whether that's that's a situation that we're in right now.
Speaker 3 (41:48):
Yeah, And even in these cases, I think the analysis
still is useful information to be presented, even if the
decision is based on other grounds.
Speaker 6 (41:59):
And while.
Speaker 4 (42:02):
We're going to interject that the the fact of the
analysis being required and that Ohira will be eventually checking
it over, you know. And I guess also, I'd say
maybe even more so with the incremental regulatory budget. The
ten for one rule gives a lot of incentives to
(42:23):
the agencies to, you know, try to get things right
ahead of time. And I did. I spent one of
my sabbaticals visiting the group that does the benefit cost
analysis at the FDA, and the person that was running
that group explained that a lot of the value, he
thought in the whole requirement of benefit cost analysis was
(42:44):
the fact that economists were working with the other groups
at the FDA and developing the regulations and saying, you know,
another group would say, what we think we need to regulate,
you know, for this type of this address this issue,
but they'd start working on that regulatory impact analysis and
the better fit cost analysis with the economists, and the
economists said, well, is that this particular feature of your
(43:06):
proposed rule is in creating a lot of cost Is
there a way to achieve that without quite so much
and he again he really felt that the there's so
much value of the benefit cost analysis process leading up
to the to the the actual benefit cost analysis that
I wouldn't uh, you know, I don't want to I
(43:29):
want to over I don't want to overemphasize that. I
think it's very much there. And it also fits you.
What what are the agencies incentives? And that's where that
incremental regulatory budget agencies I think for very good reasons,
you are trying to follow the mission of their agency.
If you're in the the e p A or the OSHAW,
(43:52):
you're you're trying to help produce the public good of
environmental safety, health, occupational safety. And the fact that you
have that you're required to come up with these you know,
cost savings from deregulations gives you this incentive well to
do as much good as I want as I can.
(44:14):
I want to get rid of the really cost the
regulations and deregulate some so I can either pass new
better regulations. And I think that kind of gets the
incentives right. And if that even gets the incentives right,
if you have, you know, sort of are a self
interested group view of what the bureaucrats are doing in
the agencies. You know, they're they're always going to want
(44:36):
to try to you know.
Speaker 7 (44:37):
Do I think they'll have strong incentives to try to
do as much good as they can, either out of
self interest or out of public interest, and that regulatory
budget is a way of incentivizing them to.
Speaker 6 (44:51):
Do that.
Speaker 1 (44:53):
So, Susan, you made a point just now that I'm
wanted to to circle back to. Briefly. You said that
you thought benefficult analysis can be important even if there's
already been a political decision at high levels about the policy.
So why would that be.
Speaker 6 (45:16):
Because it helps them understand what they're trading off. It's easier, Well,
it's harder to make.
Speaker 3 (45:23):
A policy based on intuition if you know that there
are some consequences of that that you had not thought of.
So I think it just helps them, Yeah, I mean,
and then there may be decisions this is worth it.
We're willing to make that trade off, and there are
good reasons for that. For example, as Don pointed out earlier,
benefit cost analysis doesn't consider distributional impacts.
Speaker 6 (45:45):
And yet we do.
Speaker 3 (45:46):
A lot of our regulations are intended to provide safety
nets for people who are deserving, but doing that analysis
still is valuable and can help you make sure that
you take your action in the most cost defective way,
in the most efficient way, even if it isn't doesn't
maximize that benefits.
Speaker 1 (46:07):
So here's another question from Rick Belzer, and Rick, thank
you for sending these, so he said. In the first
from administration, O and B demanded that agencies offer regulatory
impact analyzes for major deregulatory actions, even where the authoring
agency didn't perform. And if it costs analysis to justify
(46:29):
rules in the first place, and that pardon me, and
that that requirement basically resulted in slowing down the little makings,
And so he wants to know if there's a solution
to this, to this problem.
Speaker 6 (46:43):
Paul, I might toss that one to you.
Speaker 3 (46:46):
Given the president to take regulate not to go through noticing,
to be able to use legal arguments to avoid notice
in comment, is that relevant to this question?
Speaker 1 (46:56):
I think it might be. So let me just say offhand,
I can't think of a situation in which, at least
in my tenure, in which the first term administration a
wire required benefit cost analysis to deep to rescind a
regulation that had been issued without benefit cost analysis. But
(47:19):
but but it may will be so that there were
such rulemakings because we didn't typically ask whether the agency
had undertaken benefit cost analysis issue a rule we wanted
to quite regardless, we wanted to undertake benefit cost analysis
to see if recision of the rule would be would
be cost justified. And you know, I think all else equal,
(47:42):
that's that's the right approach. The fact that there was
a defect in a rulemaking doesn't doesn't automatically mean that
in we're wing to issue a rule doesn't automatically mean
the recision of that rule is cost justified. So I
think the question should just be you know, is it uh?
(48:04):
You know, uh? Is the agency likely to likely to
benefit from the benefit cost analysis in the case of
our particular rulemaking, and it is the public likely to
benefit as well? Now, Susan, you just mentioned a recent
executive order by President Trump about about rescinding regulations without
(48:31):
noticing comment, and the order directs agencies to rescind regulations
without noticing comment when the regulations are I think that
I think that the term is clearly unlawful under under
Supreme Court case law, and the order lists several cases
under under which regulations might be might be clearly unlawful.
(48:55):
These are all cases from the last few years which
the Court has made some pretty pretty important chaine is
to administrative law. UH And so you know, I think
that order it doesn't it doesn't tell agencies to rescind
regulations without conducting benefit cost analysis. It just says to
(49:15):
do so without noticing comment. But of course it's in
my experience pretty difficult cost analysis if you don't do
you know, if you don't take comment, because normally public
comments are provide the material to conduct your benefit cost analysis.
So I think it's I think it's fair to say
that AH, that agency uh p c A will be
(49:41):
UH if undertaken at all. In cases in which that
executive order has evoked h will invoked will be will
be pretty thin. And it may well be that agencies
dispense with benefit cost analysis altogether in those cases, though
again that's not replied by the order. I guess what it's.
What I'd say on that point is in cases in
which a regulation is plainly unlawful, that is to say,
(50:08):
the agency has no choice to rescind the regulation because
the existing regulation UH is it violates the underlike statute
of the Constitution. I would say that the need for
benefit cost analysis is probably at its at its low
ad there because the agency knows what it has to
do no matter what the benefit cost analysis indicates. You know,
(50:33):
the agency's authority the statute in the constitution require it
to rescind the regulation. Even if BCA says that doing
so it will costs, that will will result in an
untold prepontrating costs, right than for for exceeded benefits. There's
still a benefit to b c A even in that situation,
because it could be helpful to the public to understand
(50:56):
the costs of of UH well of the source of
law that is requiring recision of the regulation. Right, there's
a statute that an agency determines requires it to presind
a regulation. It could be helpful for the public to
understand the cost that that statute is imposing by requiring
(51:18):
recision of the regulation. That said, UH, one of the
probably the I mean in probably the main reason for
b c A is to guide the agencies exercise of
its discretion. That the agencies have discretion, then the need
for for BCA goes down, even if it's not eliminated.
So that's the right I'd say on that on that point,
but keen to hear from from Susan and Don.
Speaker 4 (51:40):
I was actually gonna go on a just a slightly
different category of that type of thing is that, you know,
sometimes the benefit under executive order what you know, Clinton's
Order one two eight sixty six, you know, set out
conditions that regulation either you know, required to go through
(52:01):
notice and comment and the benefit cost analysis, or did not,
especially the benefit of the regulatory impact analysis, not the
notice and common part. And you know there are I
think that's part of the value of that ten for one,
part of the ten for one rule as well as
the incremental budget is that there could be a lot
of regulations out there that were never conducted benefit cost
(52:24):
analysis to begin with, and yet the agencies might have
a pretty good idea that they're not working right or
that they're not very valuable, and they can be counted
in that ten for one in the in the ten
as some of the deregulations, even if even though they're
not kind of contributing to the incremental cost budget calculations.
(52:48):
And this is a way of kind of getting rid
of the underbrush of you know, these sort of ye know,
worthless or even costly regulations. And I think I one
that I guess a number of noticed during the first
Trump administration was the frozen cherry pie standard. For some reason,
the FDA, dating back to the nineteen seventies had issued
(53:08):
a very precise set of things that you had to
do to be able to call yourself a frozen cherry
pie if you're a manufacturer. And there's never any clear
benefits to that rule, and there were probably weren't very
clear costs either, But getting rid of it is this
sort of this idea of a cumulative burden of regulation
(53:29):
that if you wanted to enter business that business, that
would be one more thing you would have had to
have worried about. And that was actually but I guess
i'll that anecdote kind of ends maybe with I think
some of the tension that's going on here with with
a lotless notice and comment rule making, is that that
frozen cherry pie standard. I saw it the deregulation fairly
(53:52):
early on in the Trump regulatory agenda during the first
Trump administration. It was finalized during the Biden administration, and
so it took years and the Biden administration agreed that
this was a pretty worthless regulation. But I think that's
a lot of the Those are the issues, and the
benefit cost analysis takes time. Regulatory impact analysis takes time.
(54:16):
Is Paul pointed out the notice and comment period can
really provide useful comments to improve the benefit cost analysis
takes time, and I think there's some impatience out there
with trying to get things done faster and then really
can work with the Unless you know, I'll stop there.
(54:43):
I'm afraid I'm probably going to wander into making legal
judgments that I don't have the expertise to make.
Speaker 1 (54:51):
Well. Uh, I think Don's frozen cherry pie example is
a good one. The CFR is just full of requirements
like that. I am put in mind of one agency
who came to the White House one day to announce
that it had discovered or requirements still in the books.
(55:14):
In twenty twenty, the required regulated entities to report via telegram.
The last telegram was sent in twenty ten. There are
no telegram companies in the world, so presumably regulated parties
have not been complying. But nevertheless, it's you know, it's
very problematic to have requirements like that that are forgotten,
(55:39):
but that regulated parties have to decide on their own
volition to disregard right, it's quite antithetical to the rule
of law and damp and economic growth and luckt injury.
So the agency was happy to rescind those requirements. But
you know, I think if that story is kind of
standing for the idea that probably just about every agency
(55:59):
has has our cane requirements that it issued decades ago
and forgot about and until it has a reason to
go back and look, it's not it's not going to
do all right. So we have two minutes left until
the until twelve thirty, which is the end of this webinar.
So we turn for one more question, and here's here's
(56:21):
a question from from Zach Hale. Zach asks how we
know the current administration is actually implementing or achieving the
objectives of the ten for one order. What do we
what will we all be watching for in that ard?
Speaker 6 (56:36):
Yeah, that's a that's a good question.
Speaker 5 (56:38):
So the.
Speaker 3 (56:41):
And it is going to be hard because the ten
for one, I'm sure that they'll meet it because they'll
be able to define what's what's a deregulatory action and
what's a regulatory action in such a way that they
can finesse the accounting. The other part is done said,
it's going to be more binding, the actual cost offset.
(57:03):
So each year O and B is supposed to issue
a report on the benefits and costs of their regulations.
So we'll in the year, we'll see what that report says.
But you know, I think all this will be taken
with a grain of salt. What do you both you
both worked in the Trump administration, what do you think?
Speaker 4 (57:24):
Well, I mean, I know that the o IRAH, you know,
has also, you know, separately from the benefit cost report,
also sort of had an accounting statement every year about
exactly how it was doing on the two for one rule.
And again, you know, the the rules, the counting up rules,
REGs and d REGs is sort of the easy part.
(57:44):
The harder parts the incremental budget cost savings. And I
think the hardest part is, you know, have we really
deregulated the most important things to deregulate. It's almost impossible
to know. I mean, I think there when and that's
not something that the administration is going to be able
to definitively say or not. But I hope that academics
(58:06):
will continue to provide that outside voice of Hey, it
looks like yours. What was achieved and what wasn't achieved
by this rule.
Speaker 1 (58:15):
Yeah, that tallies of my experience as well. I found
that the cost budget is well really drives agency action
more than the more than the ratio requirement. That was
the case into two for one order. I have to
imagine it's the case under the ten for one order,
especially given that if memory serves, agencies can comply with
(58:35):
the ratio requirement by rescinding guidance. Agencies have just trobes
of guidance from from over the decades that often enough
they don't. They don't bother to rescind. I think you know,
I want to say, I'm the Department of Labor's guidance portal.
Right now, there's nine thousand guidance documents was to write.
(58:58):
I have to imagine that the agency, if it's said
about it, could rescind hundreds of those in pretty short
order and could use that recision to meet the ten
for one requirement pretty well. But that wouldn't be very
useful in meeting the right budgeting requirement unless they can
show economic benefits from the recision of those of those
(59:22):
guidance documents. So yeah, I tend to agree that the
the more important provision of the ten for one order
is actually the cost budgeting provision, and wealthy to assess
on agencies do on that through the ORB reports. Well, I, oh,
go ahead do.
Speaker 4 (59:40):
I would like to say. One thing that's true too,
is that one deregulatory action can have huge cost savings,
like the Cafe Standard Safe Act. A lot of the
net regulatory cost savings of the first Trump administration are
accounted for by one action. So when you're looking for
(01:00:00):
those significant costs, look at the big look at the
big regulation, big big regulations.
Speaker 1 (01:00:06):
That's right. Oh, that's right. Well, we are here at
the at the end of our time together. So I
want to thank our panels, Don and Susan, thank you
very much for joining us, and thanks to the audience
for being here as well, and we hope to see
you soon. Let me over to you great.
Speaker 5 (01:00:25):
What a fantastic discussion. Thank you so much Paul for moderating,
and thank you again to Susan and Don for joining
us and for sharing your insights today. For more content
like this from the Regulatory Transparency Project here at the
Federalist Society discussing the regulatory state in the American way
of life. Please visit us at regproject dot org. That
is regproject dot org.
Speaker 2 (01:00:44):
Thank you on behalf of the Federal Society's Regulatory Transparency Project.
Thanks for tuning in to the Fourth Branch podcast to
catch every new episode when it's released. You can subscribe
on Apple podcasts, Google Play, and speaker relays from our TP.
Please visit our website at reg project dot org. That's
r e G Project dot org.
Speaker 3 (01:01:13):
This has been a FEDSOC audio production
Regulation after regulation.
Speaker 2 (00:02):
There are pagated regulations that need to be changed.
Speaker 1 (00:05):
One hundred and eighty five thousand pages.
Speaker 3 (00:08):
Our public accountability and transparency.
Speaker 4 (00:11):
There will be no public supports. It's really the best
we can do. There's a regulation that doesn't make any sense.
Why do you keep you.
Speaker 3 (00:17):
Know who wrote the regulatory laws you must comply with.
Speaker 2 (00:20):
Welcome to the Regulatory Transparency Project's fourth Branch podcast series.
All expressions of opinion are those of the speaker.
Speaker 5 (00:32):
Good morning, everyone, and welcome to today's Regulatory Transparency Project
webinar titled Weigh Regulations the Metrics of White House Review.
We're so glad that you're able to join us today.
My name is Libby Dickinson, and I'm the assistant director
with the Federal Society's Regulatory Transparency Project. As a reminder,
all opinions expressed are those of the speaker. Federal in Society.
(00:52):
Our moderator today is the Honorable Paul Ray, who serves
as the acting director of the B. Kenneth Simon Center
for American Studies at the Hair Foundation. You can find
out more about today's moderator and panelists at fedsok dot org,
that ISSOK dot org. With that, I'll hand things off
to you, Paul to getting started.
Speaker 1 (01:10):
All right, great well, thanks Lebby, Thank you all for
joining us. We have a very exciting panel today. Joining
us are two incredibly distinguished panelists who I want to
introduce right away. First is Don Kinkel, who is the
Andrew Dickson White Professor of Economics in the Brooks School
of Public Policy at Cornell. His research and teaching interests
(01:31):
are in health economics and benefit cost analysis. In fact,
he's a former president of Society for Benefit Cost Analysis.
From twenty eighteen through twenty twenty, he served as a
Senior economist and then Chief Economist on the Council of
Economic Advisors. We also are very privileged to have with
us Susan Dudley, the OIRA administrator the George W. Bush Administration,
(01:53):
the founder of the GW Regulatory Study Center, and a
public policy professor at GW. Also is a past president
of a Society of Benefit Cost Analysis. So Don and
Susan are two of the leading authorities in the nation
on benefit cost analysis, and they're here to talk about
tremendously important changes to benefit cost analysis and how they
(02:17):
impact lawyers and litigation. So, first of all a few
remarks just to situate ourselves. Obviously, Trump, the new Trump administration,
has made regulatory reform one of its key policy issues.
That's been visible, probably most of all in doja's actions,
(02:39):
which have received kind of outsized attention in the last
In the last few days, Trump has also reissued many,
I believe, all of his previous executive orders on regulatory reform,
and indeed has doubled down on some of them, including
changing the former two for one order to a ten
(03:00):
for one order, that is to say, requiring the recision
of ten regulations for every new regulation issue. Now, all
those developments have been have grabbed headlines less important or well,
less newsworthy, But equally as important is a reform of
O ANDB Circular A four. Now sometimes people say that
(03:22):
Elira is the most important office you've never heard of. Well,
O ANDB Circular A four is the most important OMB
circular you've never heard of. It's the circular that governs
agency benefit cost analysis, and of course, agency benefit cost
analysis is often the decisive factor in agency rulemaking. In
November of twenty twenty three, O ANDB issued revised guidelines
(03:47):
in Circular A four for regulatory impact analysis, and in
February twenty twenty five, Trump directed OMB to revoke the
twenty twenty three changes. So the panel here is going
to talk about about the twenty twenty three changes, about
the import of the recision of those changes, and the
(04:09):
impact of all those things for lawyers. But first of all,
let me let me ask us a question out to
both panelists, why is benefit costs relevant for lawyers? And
I say that presuming that we have an audience of
mostly lawyers on this on some webinar.
Speaker 3 (04:27):
Thanks Paul and thanks Libya in the Federalist Society for
hosting this. So, benefit cost analysis has had a key
role in regulatory decisions for decades. And when you think
about it, what's the alternative to basing your regulations on
understanding of the likely impacts? Is it, you know, intuition?
(04:49):
Is it who whatever interest group has has the most power.
So presidents since Carter have required agencies to look at
the costs as well as the benefits of their regular
relations before issuing them. So it's an important component of
regulatory impact analysis that we're going to talk more about,
I think today, and the principles for doing it. For
(05:12):
the requirements for agencies to do it is in President
Clinton's Executive Order twelve eight sixty six, So that has
lasted since nineteen ninety three. Successive president has continued to
rely on that, and that requirement is to ensure the
benefits of your regulation justify the costs. Now, a few
statutes require them, you know, many don't.
Speaker 6 (05:33):
But even if.
Speaker 3 (05:34):
It's not explicit in a statute that agencies should base
their decision on looking at costs and benefits, courts are
increasingly expecting them to do that. So, probably most significantly
was Michigan VPA, where the Supreme Court looked at language
that said set regulations that are appropriate and necessary to
(05:56):
protect public health and the environment, and they said that
you can't decide an action is appropriate and necessary unless
you look at the cost relative to the benefits, So
that weighing of costs and benefits is important. In fact,
cass Sunstein has written about the cost benefit state that
we are now in a state where courts and agencies
(06:16):
and even Congress is expecting it. Now, as we'll talk
about some or many of Trump's actions are norm defying
and disrupting. But with respect to the requirement that agencies
conduct regulatory impact analysis and the role for benefit cost analysis.
Speaker 6 (06:34):
He has retained long standing practices.
Speaker 4 (06:38):
Yeah, I already like Susan's first comment that if not
benefit cost analysis, how do you make decisions? I mean,
whenever I get into these conversations, that's you flip a coint.
I'm not really sure what the alternative suggestion is. But
you know, benefit cost analysis is a tool that developed
by economists and legal freshmen as well. You know, from
(07:00):
the economic perspective. It's a tool to evaluate whether regulations
fix market failures and improve economic efficiency. And what's really
nice there is that it's a it you know, it
looks at both the costs, because sometimes fixing a market
failure can be very costly, and you have to balance
that with the benefits of fixing the market failure, and
you also have to think about all the possible unintended consequences.
(07:24):
And benefit cost analysis provides this really nice systematic way
to you know, put all those impacts together in to
a framework to say, well, are the benefits greater than
the cost? Is this an improvement in economic efficiency? And
I think we'll be kind of coming back to that
over and over, But I mean the broader context of
(07:45):
exactly how they plays out in different you know, with
the executive orders and through Ohira and everything. I think
Susan is already spoken well too, so I'll stop.
Speaker 1 (07:57):
Well, thank you both. That's that's very helpful. One question
I have for you following up on that is one
lesser discussed part of the ten for one executive order
is a regulatory budgeting provision. This carries forward a provision
from the twenty seventeen two for one order. So what
role of any this benefit cost analysis play in the
regulatory budgeting world?
Speaker 4 (08:20):
Right? I mean, yeah, it's the executive orders became known
but is known as the ten for one rule, just
like in the first Trump administration was the two for
one rule, and you said double down. I guess that's
put tupling down, actually, isn't it. But the look counting
up the number of new of old rigs that have
(08:41):
to be deregulated for every new one. That's one way
to think about these rules. But you know, the regulatory
budget is really I think that the heart of that rule,
and that says that any has some kind of a
regular rule requirement on what total costs of all new
regulations and deregulations on net that creates the economy. And
(09:07):
in the first Trump administration, the first year was it
should have no net cost, zero net cost. In the
new rule, the ten for one rule actually said it
should be significantly less than zero, so net cost savings.
And so that certainly shows you, well, you know, obviously
part of the cost benefit analysis is there, you're looking
(09:28):
at the regulatory cost. But what is also really key
is that again both the first and now the second
Trump administrations, the guidance documents very clearly require that this
is conducted together with the benefit cost analysis of every
(09:49):
regulation and every deregulation. And so it doesn't supplant, it
doesn't remove those requirements. It just adds to those requirements.
And now this gets you you have to get your
head around it for a second. Now, how do you
do a benefit cost analysis of a deregulation. Well, the
benefits are the cost savings, the regulatory cost removed because
(10:11):
you've taken away this regulation. That's the benefit side. And
now the cost side of deregulation is that we're giving
up the benefits that the regulation used to create. So
presumably even if it's a regulation or a deregulation that
passes the benefit cost test, there's still typically opportunity cost
(10:31):
of hey, we're giving up some public good that was
created by this regulation, but it wasn't. It didn't justify
the cost of that regulation. So it's kind of the
flip side of say a regulation doesn't pass the benefit
cost analysis, a deregulation does cost pass the cost benefit
and benefit cost analysis. Now, at the same time, you
(10:52):
can't just sort of put negative signs and flip everything over.
The agencies have to conduct new analyzes to see, you know,
given the currents status of the world, given new data,
new evidence, does it look like this regulation or this deregulation,
are the cost savings actually greater than the benefits? So
(11:14):
that that's how they're layered on top and you know
that this is one of ways where I guess, especially
in the first Trump administration, that this I don't know
if it was exactly an ever quite you know, norm busting,
I mean actually ever since the Carter administration, the car
Administration's Council of Economic Advisors started a conversation about regulatory budgeting,
(11:38):
and it's been used in a lot of other countries.
Canada and the Netherlands, Denmark and Norway and so in
the UK as well. What it's been tricky, I think
is sometimes it's the totality of regulatory costs. It is
so large that the idea of saying, okay, here's a
(12:01):
regulatory budget, here's totally how much cost the regulations can
impose on the economy. That measurement problem has shifted their
attention to what referred to as an incremental budget regulatory budget,
and that is, Okay, we're not quite sure how much
cost are out there, frankly, but we can say something
about the new cost being created by new budget, by
(12:22):
new regulations, and the cost savings created by old by
deregulating old regulations. And so that's that's how this regulatory
budgeting is working. As an incremental budget, that yeah, renal
regulatory budget, and you know there's some tension. I mean,
I can certainly imagine that with benefit cost analysis, I
(12:44):
mean they're the directive to find regulations to cut and
to save. I mean that could be implemented by path
by deregulating taking away really good regulations, but and by
growing good I mean regulations that have benefits greater than costs.
But when you combine it with the running the benefit
(13:06):
cost analysis of the deregulation as well. Uh, that should
keep that from happening. And it also addresses this concept
which this problem that a lot of people have noticed
that you know, they of cumulative regulatory burden, which again
that dates back to the President Clinton's executive order as well,
(13:26):
that you know, agencies should be considering about the fact
that they're laying layering but regulation over regulation, but a
lot of times one at a time, benefit cost analysis
of one regulation doesn't really capture that. So that's a
that plus also a retrospective review. It really forces the
agencies that now doge to look at the body of
(13:49):
regulations and try to figure out, you know, which ones
might be a good target to deregulation and generate cost savings.
Speaker 3 (13:58):
Yeah, excuse going if I just jump in and add something. Yeah,
because I think that's all right. In an ideal world
where we had perfect information about consequences of our government
actions and perfect incentives to maximize public welfare, benefit cost
analysis on its own might be sufficient, and a regulatory
(14:20):
budget might seem unnecessary and wrong. But neither of those
are two. We don't have perfect information and the incentives
aren't necessarily always in the public interest. So you know,
agencies incentives maybe you know, they tend to have tunnel
vision and focus on their particular issue and therefore think
that the benefits are much bigger and discount the costs.
Speaker 6 (14:43):
So I think it does address that.
Speaker 3 (14:46):
And as Don said, if and this isn't an ideal world,
it would provide an incentive to actually look at the
regulations that are in effect and determine whether they're act
achieving the benefits that we predicted. We tend not to
do that. We tend always just to predict new benefits
and then move on to the next regulation. So, just
(15:09):
to supplement what John said about that a regulatory budget
isn't necessarily anathma to the requirement for benefit costs analysis.
Speaker 4 (15:20):
I'm also point the regulatory budget doesn't have to be
less than zero. And as a matter of fact, the
Executive Order says that in future fiscal years. When I
said it was significantly less than zero, you know, cost reduction,
that was for fiscal year twenty twenty five. The Executive
Order specifically says in future fiscal years, OMB will tell
(15:40):
agencies what their target is, and that target could say
positive regulatory costs are warranted given what's on your regulatory agenda.
Speaker 1 (15:52):
And to Membory serves, in the first From administration, there
were in fact agencies that in given years had positive
regulatory budgets. By the way, I should apologize, I'm gonna
be sneezing a bit here. Uh for those of us
with allergies, we can we can verify T. S Eliott's
line that April is the coolest month. So thank you
all for for bearing with me.
Speaker 3 (16:12):
I think Paul you introduced us, but we should clarify
that you were a wire administrator during the first Trump administration.
Speaker 1 (16:19):
So yes, that's that's true.
Speaker 6 (16:20):
That regulatory budget two, Yes.
Speaker 1 (16:23):
That's that's right. So uh yeah, So that's all extremely helpful.
Now let's talk a bit about Circular A four, which
is which is the heart of of of the debate
that we're here to talk about. So what is Circular
A for and and what's his provedance? Susan, you're pretty
(16:45):
well set up to talk about that.
Speaker 6 (16:48):
Yeah.
Speaker 3 (16:48):
I liked your your opening comment about it being perhaps
one of the most important circulars that that you haven't
heard of. I think more people may be a part
of it.
Speaker 5 (16:57):
Now.
Speaker 3 (16:58):
So it was first issued in two thousand and three
in the George W. Bush administration, but that circular was
built on guidance that had been from the Reagan and
then Bush and Clinton administration, So each of those administrations
incrementally built built on the earlier administration's guidance. What made
(17:22):
it a circular is it went through notice and comment
and peer review, so that was a part of it.
So the focus of the previous guidance and the circular
was on net social benefits, that economic efficiency lens that
Don talked about just now. So why it's topical right
(17:45):
now is that in twenty twenty three, the Biden administration
revised it, also going through notice and comment and with
the goal to They talked about it being a modernization,
that the circular is twenty years all that needed modernizing,
and some of the changes I think were worthwhile and appropriate,
(18:07):
but it also in other places their concerns were raised.
I'll use the passive voice because it was a dramatic
shift from that economic efficiency lens and the traditional goal
of benefit cost analysis to provide a transparent accounting of
what we know about the consequences of regulation, the benefits,
(18:32):
the costs, the intended the unintended, and then allow policy
makers they don't need to make their decision based on
the option that looks like it has the net benefits.
There may be other factors, but that that's what the
RIA should should provide them. So Ohira received a lot
of comments and including a letter from all the former
(18:55):
presidents of the Society for Benefit Cost Analysis, of which
Don and I I are in that club, and we
raise concerns about that. You know, we made that point
that some of these are worthwhile, but there are other
changes that that really do move regulatory analysis and benefit
(19:16):
cost analysis away from its traditional purpose.
Speaker 4 (19:22):
Yeah, I'll check that. I also mentioned, just as someone
who's taught benefit cost analysis for many, many years, I
really loved the old the two thousand and three Circulary
fourth I was a great document. The textbook I was using.
I actually used an option of actually having that sort
of included in the textbook as an appendix, and I
would constantly refer to the students saying, so, you know,
(19:44):
here's how the textbook is saying, and basically the exact
same thing is being said in Circulary for and then
again this twenty twenty three revision did a lot of
good things. I mean, you know, the idea of modernizing
makes sense, and I think also to some extent, I
know a lot of people from the agencies in Ohira
(20:04):
worked on it. It helped, you know, just sort of
incorporate some things they realize would be useful guidance just
from two more decades of experience doing benefit costs analysis
of regulations. But the shift really was quite fundamental of
this idea that the economists had a very big question,
(20:26):
I think, you know, does it economic efficiency? Does a
regulation improve economic efficiency? And in that it's very specific
that you know, we're using very very precise definition of
what we mean by economic efficiency, and it boil was
down too well. Virtually every real, real world regulation is
going to have winners and losers, and the question comes
(20:49):
down to, you know, can the winners at least potentially
could the winners compensate the losers so everybody'd be better off?
And that's the same thing as saying are the benefits
greater than the cost? And that's the question about economic
efficiency that traditional standard benefit cost analysis addresses. But notice
that it doesn't say anything about who wins, who wins,
and who loses in that, and that's always been noted
(21:13):
as a limitation of benefit costs analysis, and you know,
the seminal works in the academic works say, yeah, we
don't think that's an unimportant question. In fact, we think
sometimes it might be the most important question. It's just
not a question that economists have expertise in terms of
the value judgment is how do you make that trade offs?
(21:35):
You know, how do you decide when this is important
enough to go past the uh the economic have an
an economically inefficient policy that is still worthwhile because it
achieves these other objectives like improving the distribution of income
or addressing racial justice social justice issues. And the twenty
(22:00):
twenty three revisions took a very specific approach to answering
that question, which is again actually very old, and benefit
cost analysis recent research, and it really moves from this
narrow question of economic efficiency to this much broader question
of social welfare. Will this change improve social welfare? And
(22:24):
in particular by making things more equitable? And to judge that,
they introduced the idea of distributional weights. Weiting a benefit
or cost based on the income level of the person
getting the benefit or receiving the cost. And they have
(22:45):
a very precise formula for it. They have a very
precise parameter value to plug into that formula, and what
it results in is weights that would say that like
a dollar to someone in the lowest income quintile is
worth like forty times more than the dollar to somebody
(23:06):
in the top income quintile, and that could therefore justify
a regulation that totally fails economic efficiency. In fact, you
could have like ninety five percent loss of economic efficiency
in the sense of you know, imposing cost on the
(23:26):
rich and giving them to the point giving benefits to
the core. But this weighted benefit cost analysis would conclude
this such a regulation does improve social welfare, and you know,
there's there's return to the sort of the the I
guess humility of economists hopefully we have is that we
(23:48):
can judge the regula the benefits that whether the benefits
of the costs in general outweigh whether the benefits out
weigh the costs or vice versa. But making the value
judgment there and it's also I think, by the way,
sort of very non transparently putting a value judgment in
a formula of being used by analysts that the agencies
(24:11):
is not the best way to make that decision, and
so it's better to if you know, we think we
can the economists now and saying we think that we
can provide, you know, evidence on the efficiency of a
regulation and then let democratically accountable decision makers weigh these
other factors with this, and so our regulars, we hope,
(24:34):
we know, provide useful information, but we don't make the decision.
Speaker 3 (24:39):
Reject on that point, I think that one thing economists
can do is maybe look at the benefits and costs
by different groups. So you can definitely provide decision makers
information because you certainly wouldn't want to pursue a regulation that,
even if it had huge net benefits, that benefited the
wealthiest individuals and harm the lowest income individuals. But that
(25:04):
actually often does happen.
Speaker 1 (25:05):
Regret.
Speaker 3 (25:05):
You know, regulations can be quite regressive. So that kind
of information is really valuable and economists can do that.
But as you say, it's the embedding of those values
in what should be a transparent analysis is what the
problem is.
Speaker 4 (25:23):
Yeah. Absolutely, I think if the revisions in twenty twenty three,
I think they did circularly four, I think they did
do a good job of emphasizing the economists can do that,
the agency should be talking about the distribution of benefits
and costs much more than they do. They just stopped there.
I would have been all on board, but when the
next step is when they lost me.
Speaker 6 (25:47):
Yeah.
Speaker 1 (25:47):
So one point that both of you have made, I
think it's a really important one, is that benefit costs
analysis was never meant to be a kind of a
kind of policy algorithm where you put in the right
numbers and out pops of policy and you just you know,
you you the agency just sort of follow the guidance
(26:08):
of the algorithm and making policy. Rather, it was meant
to be a tool that that equips policymakers to make
sound political judgments. That's what I hear both of you saying. So,
you know, some sometimes there's a there's a uh, there's
this criticism benefit cost analysis that it's that it's a
kind of uh it's a it's it results from a
(26:30):
kind of uh default, from from policymakers to to to
bureaucratic decision makers employing employing some sort of algorithm. But
I what I hear you both saying is that just
to the contrary, benefit cost analysis is what allows policy
makers to make informed decisions that effectuate their their policy goals.
(26:54):
Is that Is that a fair way to put it?
Speaker 4 (26:57):
Absolutely, I'm kind of smiling. My own history of teaching,
I think the first couple of times, when I was
a very young assistant professor, I more or less told
students it was an algorithm, and experience, both with teaching
and with thinking more harder about it made me realize that, Yeah,
benefit cost analysis can't be an algorithm that you just
(27:18):
plug into a computer, but it informs helps helps decision
makers make more informed decisions.
Speaker 5 (27:26):
Yes.
Speaker 3 (27:26):
Sally Katson, who was a WIRED administrator in the Clinton
administration and the lead author of the executive order that
still guys today, she often says it's informative, but not
just positive.
Speaker 1 (27:38):
Right, And that was certainly my experience as well. Yeah.
So we've talked about a couple of similar moments in
the history of Circular A four almost two thousand and three,
almost twenty twenty three, but another, surely February of twenty
twenty five, when the President directed OMB to revoke the
(27:59):
twenty twenty three amendments and go back to the two
thousand and three amendments, a version rather now there's been
a criticism of of that directive that it basically that
it pre judges what the standards should be for for
(28:21):
benefit cost analysis, when in fact, the statute under which
Circular A Floor operates, that's the Regulatory Right to Know Act,
requires requires peer review for those standards, and there's peer
review in two thousand and three, there's peer review in
the twenty twenty three. Well, I guess I forgive it
(28:43):
was late twenty twenty two or early twenty twenty three,
but peer view that resulted in the in the in
the in the issuance of a November twenty twenty three amendments.
But there's but there's not been peer review of the
of the recision going back to the two thousand and
three versions. So I came to hear your thoughts and
(29:03):
whether peer review was statutorially required toyeer back to the
two thousand and three and then it's whether, regardless of
what the required by statue, whether it would have been
a good idea to seek peer review.
Speaker 3 (29:17):
So we're not lawyers, Paul, so we may come back
and ask you that say, what do you think about
that same question? But I'll give you my non lawyer
answer and that is that the peer review.
Speaker 6 (29:29):
Really didn't support some of these key changes.
Speaker 3 (29:32):
So for example, that waiting the peer review did not
support that, it did not support a very low discount rate,
which maybe don can talk more about if people are interested.
So there were several aspects of it. Some of the
ones that I think this is the former presidents of
the Society for ben but Cost Analysis, several of whom
(29:53):
were peer reviewers, by the way, raised in our letter
and in their comments. So the Trump administration asked me,
which they did not. I think they could have, and
maybe they still could say, we actually looked at all
the comments you received and the peer review feedback that
(30:14):
you got, and we think that supports the two thousand
and three version more than it supports the twenty twenty
three version. So I think that would not require a
new notice and comment period and a new peer review,
because I think the existing one really does support the
old version more than it does the new version.
Speaker 4 (30:35):
Yeah, I don't think I have to have much to
add to that. I mean, I would. I agree that
it was quite disappointing to see the final version of
the twenty twenty three revisions, and though as I sort
of read all the peer review comments and as well
as the public comments like I submitted, I realized that
(30:58):
I was not in the minority that a lot of
people experts more expert than I am, can agreed with
a lot. We agreed on a lot of points, and
a lot of those points disagreed with the final version
of the twenty twenty three circulary for the distributional weights
was one of choosing a single relatively low discount rate
(31:22):
was another one where you know, that could have a
huge impact the issue about whether benefits should be counted
globally versus just domestic benefits. The guidance there, I think
was again, you know, sort of treating that as a
more cut and dried issue than it should be given.
(31:44):
You know, sometimes the statutes are pretty clear that US
laws are designed to improve the welfare of US citizens
or US residents, usually not just citizens. But and yet
that doesn't really follow through some of the A four guidance.
And so those two things alone, by the way, the
discount rate and the global versus domestic that those basically
(32:07):
drove the difference between the Obama and early years Biden
administration's estimate of the social cost of carbon, which is
like forty dollars a ton, and then in the first
Trump administration when they recalculated it using the guidance consistent
with the two thousand and three clear A four which
(32:28):
was in place at the time, the social cost of
carbon drops to seven dollars a time. So it's you know,
these sort of art might seem like arcane. Differences can
lead to very big differences in a key estimate like
the social cost of carbon or right social cost of
greenhouse gases, because those drive so many environmental and energy policies.
(32:52):
And yet in that circular Afour revision, they didn't fully
really incorporate a lot of for key comments made by
lots of the peer reviewers.
Speaker 3 (33:07):
Yeah, and I'll just to be Devil's advocates, because we
don't have anyone anyone on this call who is a
strong supporter of the revisions. As I say, I think
both on and I and a lot of people did
like some of those revisions, but it's a few very
important key things that we raise concerns about. So I
think the supporters would say, yes, they did listen to
(33:27):
peer review, and they did pay attention, and they did
make changes. If people are interested in diving into that more.
You can obviously look at the peer reviewers comments, there's
a packet of those, but of one of the peer
reviewers and also a former president of the Society for
Benefit Cost Analysis and editor of the Journal for Benefit
(33:48):
Cost Analysis, he did a comparison. He looked at all
the peer reviewers' comments, quoted from them and compared that
to the final and the title of his paper is
consensus ignored. So he certainly found that they did not.
And that's available as a working paper on Society for
(34:10):
Benefit Cost Analysis website and we'll be published soon in
the journal.
Speaker 1 (34:14):
Well that's that's there. Almost really helpful. Thank you both.
Don Actually, my next question was going to be, uh,
could you could you give some illustrations of the kinds
of regulatory policies that are of the way the difference
between the two and three twenty three versions might might
(34:36):
shape the discussion of different different policies. But I think
you're your point about the social culture carbon is right
on point there. So you know, I'm not a panelist,
I'm really the moderator, but that I will say, and
I you know, I think that the provision of the
regulatory right to no acts that's in question here is
(34:56):
It's quite short, as I'll read it to you. The
Director of the Office of Management and Budget shall provide
for independent and external peer review of the guidelines and
each accounting statement and associated report under this section, and
then some other language it's not relevant here. So the
requirement and the Regulatory Right to Know Act is to
provide for independent and external peer review of the guidelines. Now,
(35:21):
to my mind, that leaves open quite a bit of
discretion on the part of the ob directors as to
how to provide for such review. And one way I
would think of doing so it would be to as
as Susan suggested, to look at the comments that were offered,
(35:43):
you know, just just a couple of years ago on
the two thousand and three version and the proposed changes
to it. I would think that those comments would would be,
you know fully as informative of of the recent decision
to go back to the version, as they as they
(36:05):
would have of the decision to go forward with the
twenty twenty three versions. So I'm inclined to think that
that satisfied satisfies the regulatory Right to no requirement. But again,
I'm not a I'm not a panelist here.
Speaker 3 (36:18):
So Trump administration need to say they did that, so
the Director of OE would be simply revoked the circular
pursuant to presidential memo or or executive order.
Speaker 1 (36:33):
Yes, that's that's right. So the administration did not expressly
state that that's right. I think that's where it's worthwhile
stating that. So, I guess I want to open it
up for either don or Susan to offer any last
any last thoughts here before turning to the audience for
(36:53):
a questions that we have a number of questions already
already lined up.
Speaker 6 (36:58):
Yeah, let's go to the question.
Speaker 1 (36:59):
Yeah, all right, right, let's time to do here. All right,
So from Rick Belzer, we have the main alternative to
benefit cost analysis is benefit cost analysis run by special interests,
and he says that that's what the twenty twenty three
(37:21):
revision legitimized. The question remains, will Ohira staff be empowered
to enforce the two thousand and three edition of Circular
A four. So it's a it's a question about the
practical realities of a liar review in the second trend administration.
But so let's begin to answer that question by talking
(37:44):
about what Ohira's role implementing circularly for traditionally has been
so Susan, you're the natural that for that question.
Speaker 6 (37:53):
Either I am or you are, you can sell them.
Speaker 1 (37:56):
I'm also happy to do that.
Speaker 3 (37:57):
Yeah, you know, worked with a similar with deregulatory order
and initiatives.
Speaker 6 (38:04):
Yeah.
Speaker 3 (38:04):
Why are wear several hats in the review excuse me,
in the review of regulations, both proposed and final regulations,
and one of them is what President Obama called providing
a dispassionate and analytical second opinion on agency actions. And
that part really does try to hold agencies analysis supporting
(38:26):
their regulations, especially their regulations that are likely to have
impacts either benefits or costs of one hundred million or
more in a year to the requirements of circulary for
and the principles of that executive order. The other two
hats are coordinating across agencies and so that also provides
(38:48):
external to the issuing agency input on what the impacts
of their regulations are and maybe whether there are better
alternatives to achieve the goals, and then also accountability within
the White House. So AUIRA is a staff of career professionals,
a small staff, we might add about fifty career professionals,
(39:09):
but they are part of the executive office of the
President and so they do work closely with the policy
officials in the White House. So it adds that presidential accountability.
So to Rick's question, will does that presidential accountability mean?
Can that overrule what a benefit cost analysis might say.
(39:33):
Perhaps it wasn't in my experience when I was a
WIRAY administrator at the end of the Bush administration, that
did not happen a lot. But when it did, the
wira's staff recognized that the president is elected and we're not,
and so sometimes that makes sense.
Speaker 1 (39:50):
Yeah, I'll just add that, you know, olira's regulatory review
function is purely a creature of presidential directive. AIRA itself
exist because Congress created and statute, but it's regulatory review
function is purely a function of executive order. And that's
important because I don't think it's possible to conceive of
(40:14):
effective regulatory review other than as a that is flowing
from the directive of the president. At the end of
the day, the agencies are well, they're accountable to many stakeholders,
but at the president most of all, and appropriately in
my judgment, and so any kind of regulatory review that
(40:36):
stem from some source other than the president is just
going to be I think, likely to generate into a
kind of box checking exercise. Right, the agency may feel
obligated to comply with due to statutory requirements, but it
wouldn't actually inform agency decision making. But if it costs
analysis is likely to inform agency decision making in practice
(40:57):
only if agencies think the president and his top leadership
think it should. Right. And so it's to my mind
very important that OHIRA is a White House office and
not some other some some other agency in the in
the federal system.
Speaker 3 (41:13):
Uh.
Speaker 1 (41:13):
And and that historically it's had it's had the support
of the president of the West wing and enforcing the
requirements of a view of twelve AY six six with
respective benefit cost analysis. I think Susan's right that you
can imagine a situation in which the president's priorities are
(41:35):
are so either predetermined or urgent that it doesn't leave
any space or or benefit cost analysis. And I think
it's I think it's too early at this point to
know whether that's that's a situation that we're in right now.
Speaker 3 (41:48):
Yeah, And even in these cases, I think the analysis
still is useful information to be presented, even if the
decision is based on other grounds.
Speaker 6 (41:59):
And while.
Speaker 4 (42:02):
We're going to interject that the the fact of the
analysis being required and that Ohira will be eventually checking
it over, you know. And I guess also, I'd say
maybe even more so with the incremental regulatory budget. The
ten for one rule gives a lot of incentives to
(42:23):
the agencies to, you know, try to get things right
ahead of time. And I did. I spent one of
my sabbaticals visiting the group that does the benefit cost
analysis at the FDA, and the person that was running
that group explained that a lot of the value, he
thought in the whole requirement of benefit cost analysis was
(42:44):
the fact that economists were working with the other groups
at the FDA and developing the regulations and saying, you know,
another group would say, what we think we need to regulate,
you know, for this type of this address this issue,
but they'd start working on that regulatory impact analysis and
the better fit cost analysis with the economists, and the
economists said, well, is that this particular feature of your
(43:06):
proposed rule is in creating a lot of cost Is
there a way to achieve that without quite so much
and he again he really felt that the there's so
much value of the benefit cost analysis process leading up
to the to the the actual benefit cost analysis that
I wouldn't uh, you know, I don't want to I
(43:29):
want to over I don't want to overemphasize that. I
think it's very much there. And it also fits you.
What what are the agencies incentives? And that's where that
incremental regulatory budget agencies I think for very good reasons,
you are trying to follow the mission of their agency.
If you're in the the e p A or the OSHAW,
(43:52):
you're you're trying to help produce the public good of
environmental safety, health, occupational safety. And the fact that you
have that you're required to come up with these you know,
cost savings from deregulations gives you this incentive well to
do as much good as I want as I can.
(44:14):
I want to get rid of the really cost the
regulations and deregulate some so I can either pass new
better regulations. And I think that kind of gets the
incentives right. And if that even gets the incentives right,
if you have, you know, sort of are a self
interested group view of what the bureaucrats are doing in
the agencies. You know, they're they're always going to want
(44:36):
to try to you know.
Speaker 7 (44:37):
Do I think they'll have strong incentives to try to
do as much good as they can, either out of
self interest or out of public interest, and that regulatory
budget is a way of incentivizing them to.
Speaker 6 (44:51):
Do that.
Speaker 1 (44:53):
So, Susan, you made a point just now that I'm
wanted to to circle back to. Briefly. You said that
you thought benefficult analysis can be important even if there's
already been a political decision at high levels about the policy.
So why would that be.
Speaker 6 (45:16):
Because it helps them understand what they're trading off. It's easier, Well,
it's harder to make.
Speaker 3 (45:23):
A policy based on intuition if you know that there
are some consequences of that that you had not thought of.
So I think it just helps them, Yeah, I mean,
and then there may be decisions this is worth it.
We're willing to make that trade off, and there are
good reasons for that. For example, as Don pointed out earlier,
benefit cost analysis doesn't consider distributional impacts.
Speaker 6 (45:45):
And yet we do.
Speaker 3 (45:46):
A lot of our regulations are intended to provide safety
nets for people who are deserving, but doing that analysis
still is valuable and can help you make sure that
you take your action in the most cost defective way,
in the most efficient way, even if it isn't doesn't
maximize that benefits.
Speaker 1 (46:07):
So here's another question from Rick Belzer, and Rick, thank
you for sending these, so he said. In the first
from administration, O and B demanded that agencies offer regulatory
impact analyzes for major deregulatory actions, even where the authoring
agency didn't perform. And if it costs analysis to justify
(46:29):
rules in the first place, and that pardon me, and
that that requirement basically resulted in slowing down the little makings,
And so he wants to know if there's a solution
to this, to this problem.
Speaker 6 (46:43):
Paul, I might toss that one to you.
Speaker 3 (46:46):
Given the president to take regulate not to go through noticing,
to be able to use legal arguments to avoid notice
in comment, is that relevant to this question?
Speaker 1 (46:56):
I think it might be. So let me just say offhand,
I can't think of a situation in which, at least
in my tenure, in which the first term administration a
wire required benefit cost analysis to deep to rescind a
regulation that had been issued without benefit cost analysis. But
(47:19):
but but it may will be so that there were
such rulemakings because we didn't typically ask whether the agency
had undertaken benefit cost analysis issue a rule we wanted
to quite regardless, we wanted to undertake benefit cost analysis
to see if recision of the rule would be would
be cost justified. And you know, I think all else equal,
(47:42):
that's that's the right approach. The fact that there was
a defect in a rulemaking doesn't doesn't automatically mean that
in we're wing to issue a rule doesn't automatically mean
the recision of that rule is cost justified. So I
think the question should just be you know, is it uh?
(48:04):
You know, uh? Is the agency likely to likely to
benefit from the benefit cost analysis in the case of
our particular rulemaking, and it is the public likely to
benefit as well? Now, Susan, you just mentioned a recent
executive order by President Trump about about rescinding regulations without
(48:31):
noticing comment, and the order directs agencies to rescind regulations
without noticing comment when the regulations are I think that
I think that the term is clearly unlawful under under
Supreme Court case law, and the order lists several cases
under under which regulations might be might be clearly unlawful.
(48:55):
These are all cases from the last few years which
the Court has made some pretty pretty important chaine is
to administrative law. UH And so you know, I think
that order it doesn't it doesn't tell agencies to rescind
regulations without conducting benefit cost analysis. It just says to
(49:15):
do so without noticing comment. But of course it's in
my experience pretty difficult cost analysis if you don't do
you know, if you don't take comment, because normally public
comments are provide the material to conduct your benefit cost analysis.
So I think it's I think it's fair to say
that AH, that agency uh p c A will be
(49:41):
UH if undertaken at all. In cases in which that
executive order has evoked h will invoked will be will
be pretty thin. And it may well be that agencies
dispense with benefit cost analysis altogether in those cases, though
again that's not replied by the order. I guess what it's.
What I'd say on that point is in cases in
which a regulation is plainly unlawful, that is to say,
(50:08):
the agency has no choice to rescind the regulation because
the existing regulation UH is it violates the underlike statute
of the Constitution. I would say that the need for
benefit cost analysis is probably at its at its low
ad there because the agency knows what it has to
do no matter what the benefit cost analysis indicates. You know,
(50:33):
the agency's authority the statute in the constitution require it
to rescind the regulation. Even if BCA says that doing
so it will costs, that will will result in an
untold prepontrating costs, right than for for exceeded benefits. There's
still a benefit to b c A even in that situation,
because it could be helpful to the public to understand
(50:56):
the costs of of UH well of the source of
law that is requiring recision of the regulation. Right, there's
a statute that an agency determines requires it to presind
a regulation. It could be helpful for the public to
understand the cost that that statute is imposing by requiring
(51:18):
recision of the regulation. That said, UH, one of the
probably the I mean in probably the main reason for
b c A is to guide the agencies exercise of
its discretion. That the agencies have discretion, then the need
for for BCA goes down, even if it's not eliminated.
So that's the right I'd say on that on that point,
but keen to hear from from Susan and Don.
Speaker 4 (51:40):
I was actually gonna go on a just a slightly
different category of that type of thing is that, you know,
sometimes the benefit under executive order what you know, Clinton's
Order one two eight sixty six, you know, set out
conditions that regulation either you know, required to go through
(52:01):
notice and comment and the benefit cost analysis, or did not,
especially the benefit of the regulatory impact analysis, not the
notice and common part. And you know there are I
think that's part of the value of that ten for one,
part of the ten for one rule as well as
the incremental budget is that there could be a lot
of regulations out there that were never conducted benefit cost
(52:24):
analysis to begin with, and yet the agencies might have
a pretty good idea that they're not working right or
that they're not very valuable, and they can be counted
in that ten for one in the in the ten
as some of the deregulations, even if even though they're
not kind of contributing to the incremental cost budget calculations.
(52:48):
And this is a way of kind of getting rid
of the underbrush of you know, these sort of ye know,
worthless or even costly regulations. And I think I one
that I guess a number of noticed during the first
Trump administration was the frozen cherry pie standard. For some reason,
the FDA, dating back to the nineteen seventies had issued
(53:08):
a very precise set of things that you had to
do to be able to call yourself a frozen cherry
pie if you're a manufacturer. And there's never any clear
benefits to that rule, and there were probably weren't very
clear costs either, But getting rid of it is this
sort of this idea of a cumulative burden of regulation
(53:29):
that if you wanted to enter business that business, that
would be one more thing you would have had to
have worried about. And that was actually but I guess
i'll that anecdote kind of ends maybe with I think
some of the tension that's going on here with with
a lotless notice and comment rule making, is that that
frozen cherry pie standard. I saw it the deregulation fairly
(53:52):
early on in the Trump regulatory agenda during the first
Trump administration. It was finalized during the Biden administration, and
so it took years and the Biden administration agreed that
this was a pretty worthless regulation. But I think that's
a lot of the Those are the issues, and the
benefit cost analysis takes time. Regulatory impact analysis takes time.
(54:16):
Is Paul pointed out the notice and comment period can
really provide useful comments to improve the benefit cost analysis
takes time, and I think there's some impatience out there
with trying to get things done faster and then really
can work with the Unless you know, I'll stop there.
(54:43):
I'm afraid I'm probably going to wander into making legal
judgments that I don't have the expertise to make.
Speaker 1 (54:51):
Well. Uh, I think Don's frozen cherry pie example is
a good one. The CFR is just full of requirements
like that. I am put in mind of one agency
who came to the White House one day to announce
that it had discovered or requirements still in the books.
(55:14):
In twenty twenty, the required regulated entities to report via telegram.
The last telegram was sent in twenty ten. There are
no telegram companies in the world, so presumably regulated parties
have not been complying. But nevertheless, it's you know, it's
very problematic to have requirements like that that are forgotten,
(55:39):
but that regulated parties have to decide on their own
volition to disregard right, it's quite antithetical to the rule
of law and damp and economic growth and luckt injury.
So the agency was happy to rescind those requirements. But
you know, I think if that story is kind of
standing for the idea that probably just about every agency
(55:59):
has has our cane requirements that it issued decades ago
and forgot about and until it has a reason to
go back and look, it's not it's not going to
do all right. So we have two minutes left until
the until twelve thirty, which is the end of this webinar.
So we turn for one more question, and here's here's
(56:21):
a question from from Zach Hale. Zach asks how we
know the current administration is actually implementing or achieving the
objectives of the ten for one order. What do we
what will we all be watching for in that ard?
Speaker 6 (56:36):
Yeah, that's a that's a good question.
Speaker 5 (56:38):
So the.
Speaker 3 (56:41):
And it is going to be hard because the ten
for one, I'm sure that they'll meet it because they'll
be able to define what's what's a deregulatory action and
what's a regulatory action in such a way that they
can finesse the accounting. The other part is done said,
it's going to be more binding, the actual cost offset.
(57:03):
So each year O and B is supposed to issue
a report on the benefits and costs of their regulations.
So we'll in the year, we'll see what that report says.
But you know, I think all this will be taken
with a grain of salt. What do you both you
both worked in the Trump administration, what do you think?
Speaker 4 (57:24):
Well, I mean, I know that the o IRAH, you know,
has also, you know, separately from the benefit cost report,
also sort of had an accounting statement every year about
exactly how it was doing on the two for one rule.
And again, you know, the the rules, the counting up rules,
REGs and d REGs is sort of the easy part.
(57:44):
The harder parts the incremental budget cost savings. And I
think the hardest part is, you know, have we really
deregulated the most important things to deregulate. It's almost impossible
to know. I mean, I think there when and that's
not something that the administration is going to be able
to definitively say or not. But I hope that academics
(58:06):
will continue to provide that outside voice of Hey, it
looks like yours. What was achieved and what wasn't achieved
by this rule.
Speaker 1 (58:15):
Yeah, that tallies of my experience as well. I found
that the cost budget is well really drives agency action
more than the more than the ratio requirement. That was
the case into two for one order. I have to
imagine it's the case under the ten for one order,
especially given that if memory serves, agencies can comply with
(58:35):
the ratio requirement by rescinding guidance. Agencies have just trobes
of guidance from from over the decades that often enough
they don't. They don't bother to rescind. I think you know,
I want to say, I'm the Department of Labor's guidance portal.
Right now, there's nine thousand guidance documents was to write.
(58:58):
I have to imagine that the agency, if it's said
about it, could rescind hundreds of those in pretty short
order and could use that recision to meet the ten
for one requirement pretty well. But that wouldn't be very
useful in meeting the right budgeting requirement unless they can
show economic benefits from the recision of those of those
(59:22):
guidance documents. So yeah, I tend to agree that the
the more important provision of the ten for one order
is actually the cost budgeting provision, and wealthy to assess
on agencies do on that through the ORB reports. Well, I, oh,
go ahead do.
Speaker 4 (59:40):
I would like to say. One thing that's true too,
is that one deregulatory action can have huge cost savings,
like the Cafe Standard Safe Act. A lot of the
net regulatory cost savings of the first Trump administration are
accounted for by one action. So when you're looking for
(01:00:00):
those significant costs, look at the big look at the
big regulation, big big regulations.
Speaker 1 (01:00:06):
That's right. Oh, that's right. Well, we are here at
the at the end of our time together. So I
want to thank our panels, Don and Susan, thank you
very much for joining us, and thanks to the audience
for being here as well, and we hope to see
you soon. Let me over to you great.
Speaker 5 (01:00:25):
What a fantastic discussion. Thank you so much Paul for moderating,
and thank you again to Susan and Don for joining
us and for sharing your insights today. For more content
like this from the Regulatory Transparency Project here at the
Federalist Society discussing the regulatory state in the American way
of life. Please visit us at regproject dot org. That
is regproject dot org.
Speaker 2 (01:00:44):
Thank you on behalf of the Federal Society's Regulatory Transparency Project.
Thanks for tuning in to the Fourth Branch podcast to
catch every new episode when it's released. You can subscribe
on Apple podcasts, Google Play, and speaker relays from our TP.
Please visit our website at reg project dot org. That's
r e G Project dot org.
Speaker 3 (01:01:13):
This has been a FEDSOC audio production
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