Unbalanced Retrospective Regulatory Review

The potential of the retrospective review of rules adopted by federal agencies has been hailed by both the right and the left as a way to improve regulation and increase efficiency: by collecting information on what works and what does not, we can make better choices in the future. The Obama Administration has embraced this vision of retrospective review, but unfortunately, by focusing almost exclusively on cutting costs, it is walking back its commitment to use this tool in a balanced fashion. In January 2011, President Obama issued Executive Order 13563, on retrospective review of regulations. Under that order, agencies were instructed to identify not only “excessively burdensome” regulations to be repealed them but also “insufficient ones” to be expanded. This balanced approach was meant to “protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation.” It’s been over a year since that original directive was announced, and since then federal agencies have made little progress toward achieving that balanced approach to retrospective review. In practice, agencies have focused almost exclusively on small-bore red tape-snipping. Protection enhancing steps like revising rules to be technologically up-to-date, or examining whether costs have been overestimated and additional benefits could be eked out of existing rules, are rare—if they indeed have happened at all. Recently, President Obama issued a second, follow-up Executive Order on retrospective review. This new Order in effect tips the scales even further in favor of deregulation. As a part of a federal effort to reform the regulatory system by reviewing and modifying existing rules, the new order, entitled “Identifying and Reducing Regulatory Burdens,” places extra emphasis on cost-cutting initiatives and paperwork reduction for businesses. With the new Executive Order, Obama is institutionalizing this unbalanced practice of retrospective review, undermining the promise of Executive Order 13563’s instructions to both trim and expand existing regulations. Instead, the new Order promotes and emphasizes the unspoken deregulatory slant by putting it into words: it calls for agencies to give higher priority to measures that “will produce significant quantifiable monetary savings,” while making no mention of expanding rules that work and could deliver even greater net benefits. The unbalanced focus is reflected in a second round of reports released concurrently by federal agencies updating their progress on regulatory review. The regulatory reviews reported by the agencies cover plenty of ground but do not dig very deep. For example, of the numerous regulatory reviews underway at the Departments of Education, Health & Human Services (HHS), Housing & Urban Development, and Justice, more than half largely focus on just two types of reforms—paperwork reduction and rules that have become obsolete. Both are surface-level and neither look for ways that the rules could deliver more benefits. They favor administrative cost-cutting and low-hanging fruit over substantive analysis of where public protections might be strengthened. The plan HHS has proposed is a good example. A huge chunk of its planned actions feature simple paperwork reduction, such as revising cost reporting requirements for hospitals regarding pension costs; many other proposals similarly focus on moving from paper to electronic file reporting or streamlining permit applications and approval processes. The second main category of proposals made were changes necessary because the statute has been amended, because of some inconsistency or need for clarification in the regulations, or because the rules have simply grown completely outdated and aren’t used anymore. These are important changes and the savings for businesses are useful (especially in woeful economic times). But focusing on them shouldn’t detract from the other goals of retrospective review. It is still important to review the efficiency of rules due to changes in technology, economics, or other circumstances, as well as to see if new data on costs and benefits suggests a rule change. Though limited, there are some efforts being undertaken that go beyond administrative cost-cutting. HHS formed an agency-wide Analytics Team tasked with improving regulatory analysis across agencies by “making the quality of analysis more consistent and by better integrating this analysis into regulatory decision-making.” The team will consist of economists and analysts from HHS agencies who will work to establish best practices of analyses and interagency information sharing. The protections provided by agency regulations hold tremendous value. The process of retrospective review has the potential to fine-tune these rules to provide even more benefits. Tough economic times and political pressure may favor cost-saving initiatives, but promoting them at the expense of a balanced review fails to use this tool to maximize value for the public