E.O. 12866 - 25th Anniversary Remarks

Photo of Richard Revesz

By: Richard Revesz (Guest Commentary)

October 09, 2018

(Professor Revesz participated in our 'Celebrating 25 Years of E.O. 12866' event on a panel discussing the future of the executive order and its principles in the rulemaking process.  He was joined on stage by Neomi Rao - OIRA Administrator, Ann Marie Buerkle - Consumer Product Safety Commission Acting Chair & Commissioner, Susan Dudley - GW Regulatory Studies Center Director, and John Cooney - former OMB Deputy General Counsel.  Below are his notes for his opening remarks)

Introduction

I’m very grateful to Susan Dudley and the GW Regulatory Studies Center for inviting me and it’s a real privilege to be asked to discuss these important issues with such distinguished co-panelists. The 25th anniversary of the EO is, indeed, an important event, and more so because of the prior 12 years under EO 12,291.  The bipartisan consensus over the significant role of cost-benefit analysis and of the institutional role of OIRA over almost four decades is a very significant—and in my view very positive—development in the administrative state. In fact, I would rank it as one of the top two most important post-New Deal developments, together with the D.C. Circuit’s articulation, in the 1970s, of hard-look review of administrative action.

But while I definitely don’t want to be the skunk at the party—and hope that you won’t think of me that way—I worry about us focusing too much on the celebration and not enough on the dark clouds that I see gathering.  If we want to preserve cost-benefit analysis for the future, we need to be clear about the significant affronts of the last 20 months and fight to protect from the deregulatory forces that are running roughshod over it. Given the limits of time allotted to me and the format of the panel, I will give you only ten quick examples but would be happy to elaborate in responses to subsequent questions.

Ten Examples

1.      First, President Trump’s Executive Order 13,771 requires a cap on costs suggesting that the goal is to minimize overall regulatory costs, not to maximize the net benefits of regulation, which is a hallmark of cost-benefit analysis. Any respected economist would cringe at this one-sidedness. It would be absurd for the economic analysis of policy to ignore the deaths averted, the reduced number of hospitalizations, the morbidity reductions, and other significant decreases in the well-being of Americans.

2.      Second, the Trump Administration has justified a number of its efforts to delay, stay, or suspend Obama Administration regulations, by reference only to the cost savings to regulated industries, without looking at the forgone benefits to the regulatory beneficiaries.  Thankfully, the courts have set aside a significant number of these misguided initiatives.

3.       Third, different agency heads have cast doubt on the propriety of taking co-benefits into account in evaluating regulatory measures while at the same time urging more extensive consideration of the indirect costs of regulation. To take into account the indirect negative consequences of regulation but ignore the positive ones is the very embodiment of “arbitrary and capricious” conduct.

4.      Moving to specific rules, consider the Interior Department’s repeal of the Coal Valuation Rule.  The asserted benefit of the savings to fossil fuel companies. The reduction of government royalties is ignored.  Looking at one side of a transfer payment, calling it an economic benefit, and ignoring the other side of the transfer payment is a hallmark of bad analysis.

5.       Let’s turn to the Labor Department proposal to allow restaurant owners to keep tips that customers leave assuming that they will go to their servers.  An obvious consequence of this rule is that customers might leave lower tips.  Estimates of this sort existed but the Labor Department did not consider them and OIRA, though aware of these estimates, did not require them to be considered.  Eventually, Congress blocked this proposal through an appropriations rider.

6.      The Department of Health and Human Services proposed a rule that would no longer require organizations that receive Title X funding to counsel women about abortion. In its analysis of the rule, HHS fails to take into account the negative impact on women who receive incomplete information about their options.

7.      Last year, NHTSA issued a rule that suspended for two years an increase in  the civil monetary penalties for violations of its fuel economy standards for two years. NHTSA claimed that “no party [would] be harmed by the delay” even though its own model, which it did not use to analyze the rule, showed that the delay would cause non-compliance with fuel economy standards to jump by 200% and vehicles to consume an additional 54 billion additional gallons between 2017 and 2032.  The Second Circuit vacated that suspension rule within days of argument.

8.      EPA’s and the Army Corps proposed repeal of the Clean Water Rule, which defines the scope of jurisdiction under the Clean Water Act. The agencies dismissed any study of quantified wetland benefits published before 2000 as too old, because "the age of these studies introduces uncertainty."  Meanwhile, the agency relied on equally old cost studies.  And it didn’t take into account more recent benefit studies, which show that the positive economic value of wetlands has been increasing over time.

9.      Just last week, the Department of Health and Human Services proposed a rule that would today that would make receipt of public benefits (and a number of other health factors) strong negative factors for immigrants applying to extend their legal status in the US and for legal permanent residence.  The vast majority of DHS’s analysis of the costs of the rule is a quantification of the cost of filling out additional forms. There is no discussion of the impacts on immigrants that will now be denied a visa extension or green card due to the heightened standards.  Also, DHS does recognize that this rule may cause immigrants to forgo certain public benefits in order to extend their visa or get a green card. But after 100 pages of analysis on the costs of filling out forms, DHS lists on 1/2 page and does not discuss the effect of on the individuals forgoing these benefits so as not to imperil their immigration status: lost productivity, adverse health effects, additional medical expenses, housing instability, and increased poverty.

10.  Perhaps most galling of all is the analysis accompanying EPA’s replacement of the Clean Power Plan.  In part, the proposal, EPA says that it is exercising its discretion to interpret the scope of its authority narrowly.  It acknowledges that doing so will cause net harms to the American people of tens of billions of dollars.  The agency doesn’t even attempt to explain why it should be exercising its discretion to cause such harm.

Conclusion

I don’t want anyone to interpret what I say as a veiled attack on OIRA or on the work that Neomi is doing.  First, my attack is not veiled at all—it is quite direct.  But the problems to which I allude are government-wide and I don’t believe that there is anything that Neomi could do—on her own—to right the ship.  That’s why the clouds are so menacing.

*For further content from the author, click here.

**This commentary reflects the views of the author, and does not represent an official position of the NYU Law School, the GW Regulatory Studies Center, or the George Washington University.**

To view photos, videos, and other commentaries from our Celebrating 25 Years of EO 12866 event, CLICK HERE.