The Office of Management and Budget recently released draft guidelines to federal agencies describing how they should conduct analyses to support regulatory decisions. Such guidelines can make the regulatory process more transparent and also help in devising policies that are economically sensible.
In general, we think OMB’s draft guidelines represent a step forward. The introduction of a requirement to provide a table summarizing the economic impacts of a regulation, and a requirement that uncertainty be handled more rigorously are welcome innovations. At the same time, we suggest that OMB emphasize that benefit-cost analysis is preferred to cost-effectiveness analysis when information on monetized benefits and costs can be obtained at a reasonable cost. Although both tools are useful, we suggest that regulatory agencies strive to acquire enough information to perform benefit-cost analyses. We also recommend that OMB provide more guidance to agencies on defining reasonable policy alternatives. Finally, we argue that OMB should rethink its proposed policy on discounting.
Since the presidency of Ronald Reagan, all presidents have used executive orders that required federal regulatory agencies to prepare detailed regulatory analyses for economically significant regulations. Executive Order 12866, signed by President Clinton and amended slightly under President George W. Bush, requires that agencies conduct analyses that identify policies that are not only cost-effective, but also provide benefits that justify their costs.
The Office of Management and Budget recently released draft guidelines to federal agencies describing how they should conduct analyses to support regulatory decisions. These guidelines can make the regulatory process more transparent and also help in devising policies that are economically sensible. This comment identifies two aspects of the proposed guidelines that are useful and offers three recommendations for improving OMB’s draft guidelines for conducting regulatory analyses.