The White House moved Thursday to revise the government’s regulatory toolkit for the first time in a generation.
Guidances and best practices for how today’s rules are written and vetted have been accumulating at the Office of Information and Regulatory Affairs (OIRA) since the Reagan administration. The key ones were codified in the 1990s and aughts and haven’t been updated since.
But now, two years after President Joe Biden directed his regulatory office to do so in an Inauguration Day executive order, OIRA is proposing to refurbish the federal government’s threadbare regulatory practices with cutting-edge economics and science and a new-found focus on equity and justice.
It’s a wonky process with a lofty goal.
“Improved analysis will lead to better policy that improves societal well-being,” OIRA states in one of the myriad documents it unveiled Thursday under the title “Modernizing Regulatory Review.”
Key parts of the package won’t be final until after a 60-day public comment period and peer review. The public comment period opens today and ends June 6, though the White House hasn’t said when it will finalize the guidance.
But the final product promises to change how agencies weigh the costs and benefits of rules and value protecting marginalized communities and future generations.
OIRA proposes an expanded role for the public in setting agencies’ regulatory agendas and tweaks to the kinds of stakeholders who can expect a White House meeting during review of a rule. Other changes would center on how to consider a rule’s consequences that don’t fit neatly into an accountant’s ledger.
The centerpiece of the effort is a governmentwide guidance for weighing a rule’s costs and benefits that dates from 2003. The document’s longevity shows the Biden White House’s changes could have staying power.
“These are very long-standing practices,” said Michael Livermore, a University of Virginia professor who has worked closely with OIRA Administrator Richard Revesz. “They’ve evolved over time in this kind of bipartisan process.”
The newest update, he said, is “not like a radical break from the past.”
More benefits, fewer costs
But the package makes important changes to past practices — mostly in ways that will emphasize the benefits and play down the costs of public health and environmental safeguards.
Take OIRA’s proposal to dramatically reduce the discount rate agencies use to value the future costs and benefits of a decision or rulemaking. The discount rate enables agencies to assign those prospective impacts — that would occur years in the future — a lesser value than the costs incurred or benefits enjoyed today.
Since the George W. Bush administration, OIRA has been calling on agencies to base their decisions on an annualized discount rate between 3 percent and 7 percent. Thursday’s draft whittles that down to 1.7 percent. That means future impacts would be given more weight than they are currently given in cost-benefit analyses.
It’s long overdue, said Jason Furman, who served as the principal deputy director of the National Economic Council under President Barack Obama.
“We actually looked at doing this in the Obama administration and left running out of time,” he said, adding that the current figures have “gotten embarrassingly out of date with the way economists think about the issues.”
Traditionally discount rates were tied to federal interest rates. The logic was that society could invest what it didn’t spend and accrue interest. But interest rates haven’t been anywhere near an annualized 7 percent for decades.
“I think you might be interested to know that the discount rates that the [Office of Management and Budget] used actually started at 10 percent in the 1980s,” said John Graham, George W. Bush’s OIRA administrator who finalized the last version of the regulatory review analyses’ guidance. “So this is part of a continuum, which has been increasingly smaller discount rates that has been going down for 30 or 40 years.”
A lower discount rate puts a higher value on the suffering of future Americans — which will make costly climate rules easier to justify. That’s particularly true because the OIRA proposal suggests even lower annualized discount rates for the years starting after 2090.
Thursday’s guidance also proposes that agencies consider valuing costs or benefits to poor communities or citizens above costs or benefits that accrue to wealthier ones.
“It does have a pretty strong social justice rationale,” Graham said. “So, I think that it’s natural that this administration would be leading on this issue.”
OIRA notes in its draft that $100 given to “a low-income individual” has greater welfare benefits than the same $100 given to a wealthy person. But cost-benefit analyses have always given equal weight to benefits or costs no matter who enjoys or pays for them.
Considering distributional effects, as they’re called, could support stronger air quality and climate rules because poor and minority populations are disproportionally impacted by local pollution and climate-related harms, like respiratory illnesses linked to smog from ozone and warmer temperatures.
White House face time
Sally Katzen, an OIRA chief under President Bill Clinton, said the package could change who the executive branch hears from during regulatory review.
Katzen, who oversaw the creation of an OMB directive that this package would tweak, said that when she was at the White House in the 1990s, closed-door meetings at the Eisenhower Executive Office Building weren’t a routine item on a lobbyists’ agenda.
“Now it’s almost a legal malpractice not to request a meeting,” she said. “But the meetings have, I think, degenerated into less productive sessions.”
Industries that would be subject to a regulation tend to take the most meetings now during its review. But OIRA is looking to encourage more of the rules’ would-be beneficiaries to sit down with federal decisionmakers.
“To the marginalized communities who haven’t really participated in our meetings in the past, and they’re saying, ‘Do call, ask for a meeting, we’d love to hear from you,'” Katzen said.
But OIRA is floating more joint meetings and fewer repeat visits for, as Katzen put it, “those who have made it a practice to show up, whether they have anything to say or not.”