An Analysis of the Ninth Government Report on the Costs and Benefits of Federal Regulations

Robert Hahn and
Robert Hahn
Robert Hahn Director of Economics - Smith School of Enterprise and the Environment at the University of Oxford, Former Brookings Expert
Robert E. Litan

June 15, 2006

Executive Summary

This paper critically reviews the draft of the Office of Management and Budget’s ninth report on the benefits and costs of federal regulation. The draft report is similar to previous reports, and does not break new ground.

We offer seven recommendations—six for OMB and one for Congress—that would help hold lawmakers and regulators more accountable for the regulations they produce. Our recommendations focus on getting the regulatory agencies to produce better analysis, making that analysis more transparent and readily available, and making the regulatory process itself more transparent.

We recommend that OMB:

  • examine the extent to which regulations maximize net benefits;
  • include a scorecard showing the number and percentage of final regulations that pass a benefit-cost test based on factors that can be quantified and monetized;
  • request that all agencies report on the extent to which they comply with OMB’s guidelines for conducting regulatory analysis;
  • provide guidelines for assessing the effectiveness of antiterrorism regulations;
  • include a discussion of the costs and benefits of antitrust activities in its annual report; and
  • facilitate the use of information markets to increase overall economic efficiency and to inform regulatory decision making

We also recommend that Congress require all agencies to comply with OMB’s guidelines for conducting regulatory analysis.

1. Introduction

The Office of Management and Budget (OMB) has recently released a draft of its ninth annual report to Congress on the costs and benefits of federal regulation. The law requires that OMB submit a report to Congress that provides estimates of the costs and benefits of federal regulation. The report is also supposed to make recommendations for reform, provide guidelines for agencies to standardize benefit and cost estimates, and assess the impact of federal regulation on State and local government, small business, wages and economic growth.

The 2006 OMB draft report offers a new discussion of some international developments in regulatory policy. While this discussion is useful, it does not address the actual impact of regulatory oversight mechanisms, which is a very important issue. For example, it compares U.S. and EU guidelines on regulatory analysis, but does not consider whether these guidelines affect policy in any meaningful way.