Improving Regulatory Accountability

Robert Hahn and Robert E. Litan


Although regulations resulting from legislative mandates often have no direct fiscal impact, they pose real costs to consumers as well as businesses. Regulations aimed at protecting health, safety, and the environment alone cost over $200 billion annually—about half as much as outlays for federal discretionary programs. Yet, the economic impacts of federal regulation receive much less scrutiny than discretionary programs in the budget.

In 1996 Senator Ted Stevens added an unprecedented amendment to the Omnibus Consolidated Appropriations Act of 1997 that could have a major impact on how regulations are assessed in the future. That amendment requires the director of the Office of Management and Budget to provide Congress with estimates of the total annual benefits and costs of federal regulatory programs and estimates of the benefits and costs of individual regulations. That is the first statute to mandate such an accounting.

The purpose of this primer is to lay out the case for such regular accounting beyond the steps mandated by the Stevens Amendment. In particular, we hope to enable policymakers to make better use of available economic tools as they develop more reliable and accessible information on the benefits and costs of regulations.

We conclude that the federal regulatory process is in need of repair. Part of what is required is an improved accounting statement conveying the benefits and costs of regulation. The Office of Management and Budget, the Council of Economic Advisers, or both organizations should produce a unified economic regulatory accounting statement that systematically characterizes the benefits and costs of federal regulation on an annual basis in a form that would be accessible to a wide audience. The report would provide information to the public, interest groups, and legislators as they engage in debates about billion-dollar regulatory policies that are likely to affect all Americans.

While some will undoubtedly object to any proposal to reform regulation, we see our proposal as relatively modest. It does not require that regulations pass a benefit-cost or cost-effectiveness test. It simply helps to make an arcane, unsystematic process more transparent and systematic by introducing a unified approach for analyzing and disseminating key information on the effect that regulatory policies have on consumers, businesses, the environment, and government entities. The changes we propose will help promote democratic ideals by increasing public awareness and raising the accountability of our elected officials. They should also improve regulatory policies by developing more effective and less burdensome regulations.