An Analysis of the Seventh 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

May 15, 2004

This paper critically reviews the draft of the Office of Management and Budget’s seventh report on the benefits and costs of federal regulation. The draft report represents an improvement over previous reports in two ways. It explores regulatory reform worldwide and discusses the costs of regulation on the manufacturing sector. OMB’s focus on the manufacturing sector, however, is unduly narrow. OMB should focus on reforming regulations in other sectors as well.

While there has been progress, some useful innovations from last year are not included in this draft. Unlike last year’s report, this year’s draft report does not list homeland security regulations by agency or provide useful summary information on a number of OMB’s regulatory oversight activities, such as return letters and prompt letters.

There is room for significant improvement. We offer six recommendations—four for OMB and two 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 include a scorecard that summarizes the extent to which regulatory analyses comply with OMB’s guidelines; apply its in-house expertise to improve the quality of agency cost-benefit analyses; ask independent agencies to provide annual assessments of the costs and benefits of their major regulations and that OMB report them when available; and include a discussion of the costs and benefits of antitrust activities in its regulatory report. We request that Congress require the Federal Trade Commission and Department of Justice to submit annual benefit and cost estimates of selected antitrust activities to OMB. We also suggest that Congress require that all agencies, including independent agencies, comply with OMB’s guidelines.