What if a tiny government agency staffed by career economists wielding cost-benefit analysis as their primary tool were in charge of reviewing and modifying substantive regulations from most major federal agencies, despite their lack of subject-matter expertise on topics as varied as climate change, workplace health hazards, and automobile safety standards?
Since the 1980s, this hasn’t been a hypothetical. The agency is called the Office of Information and Regulatory Affairs (OIRA), and it’s about as bad as you’d imagine, conducting wide-ranging reviews of regulation with minimal transparency, as we’ve written about before. With President Biden’s Modernizing Regulatory Review reforms — the continuation of an initiative announced Biden’s first day in office to update OIRA’s role in the process of reviewing regulations — expected to be announced any day now, we want to draw attention to OIRA’s role, and particularly how the scope of its oversight power has grown over the forty years since its inception.
A Brief History of OIRA
Originating with President Carter’s Paperwork Reduction Act of 1980, OIRA sits within the Office of Management and Budget (OMB) in the executive branch. The office has evolved significantly, driven primarily by the layering on of executive orders (rather than updating legislation) by subsequent presidents. In 1981, Reagan’s E.O. 12291 established OIRA’s regulatory oversight role by requiring most federal agencies to submit “major rules” — defined as those expected to have an annual economic impact of $100 million or more — to OIRA’s cost-benefit analysis review. In 1993, President Clinton’s E.O. 12866 repealed Reagan’s, and attempted to narrow OIRA review to “significant” rules, adding in considerations related to inconsistencies between agencies’ regulatory actions and the raising of “novel legal or policy issues.”
However, Clinton’s Order, which remains in effect today, retained the $100M threshold for economic significance. This was shortly followed by two pieces of Clinton-era legislation — the Unfunded Mandates Reform Act (UMRA) of 1995 and the Congressional Review Act (CRA) of 1996 — that used a $100M economic impact level to flag legislation for additional scrutiny and review, this time by Congress. The Acts also spell out a possible role for OIRA in determining which rules reach the $100M level, providing something like a statutory basis for OIRA’s power to review regulations.
In alignment with other progressive policy advocates, we have significant concerns about the role and position of OIRA broadly, including but not limited to the entrenchment of anti-regulation career economists within the office; the creation of yet another avenue for lobbyists and corporate interests to interfere in the regulatory process; and the generally deregulatory bent of economic tools like cost-benefit analysis. In one recent example, as Lisa Gilbert wrote for The Hill this week, the toxic, hugely damaging Norfolk Southern train derailment in East Palestine, OH, last month could have been avoided if Trump’s OIRA — really, many of the same staff economists still employed in Biden’s OIRA — had not thrown out a rule that “would have required trains to install modern electronic brakes,” on the basis of a so-called cost-benefit analysis that “omitted up to $117 million in estimated future damages from train derailments.”
Notably, at a very basic level, OIRA’s role in the regulatory process often means significantly slowing down the passage of life-saving regulations, sometimes without making substantial changes to the rules in the end. From the start of President Biden’s term through this week, according to OIRA’s dashboard at RegInfo.gov, the average review time for a regulation was 69 days. (OIRA is supposed to review rules and return them to agencies in 90 days, but in practice can and does regularly receive extensions of time.) This overall average, as usual, does not tell the whole story – the average review time for one agency’s rules reached 280 days over the same time period, with 8 of 32 agencies’ average review times exceeding 90 days.
These delays aren’t concerning on principle alone — they translate to direct negative impacts on, and even deaths of, members of the public, as every week, month, and year that life-saving rules are delayed results in more harm caused. From delaying OSHA regulations intended to protect workers from silica dust, to delaying and weakening regulation on handling of coal ash (a toxic byproduct of coal-fired power plants), to delaying implementation of rearview camera requirements for cars, OIRA has a long history of needlessly delaying rules that could measurably save lives.
OIRA’s Scope Creep
We’ll continue to expand on the concerns listed above in upcoming work. For now though, we’d like to draw attention to OIRA’s scope creep via the $100M review threshold, both because it’s a stunningly simple lever to immediately address the growth of OIRA’s role and significance — and ability to review and delay increasing numbers of draft rules — and because it’s something President Biden has clear power to address.
There are several problems with the persistence of the $100M threshold for economic significance. For one, E.O. 12866 and both pieces of legislation listed above failed to anchor this number to inflation, GDP, or any other indicators of economic growth, which would have made the number much larger today.
Secondly, and perhaps more to the point, the $100M “economic impact” figure is, and always has been, both low and incredibly arbitrary. There’s the question of scale, for one thing — as our collaborator James Goodwin at the Center for Progressive Reform pointed out, there were 82 million households in 1981, for a per-household cost of a little over a dollar per year supposedly qualifying a rule as “major” or economically significant.
Further, as established in the Congressional Review Act, rules can be defined as “major rules” that “meet [this] economic threshold….for a variety of reasons, including because they involve compliance costs, result in transfers of funds, prompt consumer spending, establish user fees, or result in cost savings for consumers and taxpayers” (CRS report). The numeric threshold distills a wide range of possible impacts on wildly different people and entities into a single number, providing a seemingly simple standard that actually flattens and oversimplifies many possible phenomena into one value. One might care significantly less that a corporation needs to shell out $100M or more to comply with life-saving regulation, while caring substantially more that the government might be required to pay $100M or more for a different regulation. But the real, material differences between, say, the “cost” of corporate compliance, and the “cost” of increased asthma among children is obscured by this translation.
The static threshold established by E.O. 12866, the UMRA, and the CRA treats these as being relevant for the same reason — the total estimated “impact” — with little regard for the nature of the impact. As we’ve written about recently, this conceptual flattening is a familiar characteristic of economics-driven policy analysis, which places more weight in things that can be easily quantified than in more nebulous concepts like, say, the public good, or the benefits to real people of regulating profit-driven, extractive corporate entities. In the case of OIRA’s economic significance threshold in particular, this arbitrary, flattening figure is a growing problem as time passes. As the economy grows and the $100 million threshold becomes more and more outdated, more and more rules come under OIRA’s purview, despite the limitations of their expertise to a troubled form of economic analysis.
There are extremely important caveats to our call to increase the $100M threshold. For one thing, changing the threshold using executive power would not affect the statutory definitions of “major rules” that would remain in effect through the UMRA and CRA — these laws would need to be amended or repealed by Congress. Further, it’s important to note that OIRA doesn’t just review “economically significant” rules. E.O. 12866 laid out several other categories of regulations that the agency can review, regardless of estimated economic impact. According to OIRA’s regulatory review dashboard, just 35 of the 115 rules they’re currently reviewing (or 30.4 percent) are under review due to their economic significance. For these reasons, addressing OIRA’s scope creep and lessening the control of regulation-skeptical economists over federal agencies’ rulemaking will take more than an executive order addressing the $100M threshold. (Biden could also, for instance, give agencies the power to decide whether rules they issue are significant, or require OIRA to publicly justify why they have deemed a given rule significant, to improve transparency.)
But significantly increasing the $100M threshold in an updated executive order, and tying whatever new figure is established to indicators of economic growth, is a clear step President Biden can take with executive power alone. While this change is far from sufficient, it is a feasible early measure that would indicate an understanding by the Biden administration of the danger of OIRA’s scope creep, and more generally the danger of giving economists veto power over rules designed by issue-area experts with priorities and concerns beyond economic efficiency (concerns a majority of the general public share). While we and aligned groups would welcome a much more substantial overhaul of OIRA’s role — as we’ll expand on in future work — adjusting the economic significance threshold is a clear, baseline step that’s too obvious not to take.
Image: “2023 Ohio train derailment” by the National Transportation Safety Board is in the public domain.