Some aspire to understand whether federal regulations on the whole do more harm than good—that benefits exceed costs. But how would they know for sure?
One would hope to learn from the White House Office of Management and Budget’s new draft Report to Congress on the Benefits and Costs of Federal Regulations and Agency Compliance with the Unfunded Mandates Reform Act. This new edition is a catch-up consolidation of fiscal years 2020-22.
The answer is unlikely to be found therein, however, despite the Biden administration’s conviction that its top-down regulation of the economy from Washington is net-beneficial. Claims of net-benefits for rules standing alone can already be suspect—let alone assertions for the entire unappraised administrative enterprise.
By law, the Report to Congress appears annually, but in practice it’s more elusive. Biden’s consolidated edition is not the first time for a catch-up release, though. The Report combining fiscal years 2017-2019 appeared in a single abbreviated volume back in January 2021; that had been the last one we had in hand until this week.
The amalgamated reports we’re getting lack not only an aggregate regulatory cost estimate required by the Regulatory Right-to-Know Act; the now omit even the ten-year lookbacks that had taken its place.
The Report covers “major” rules and regulations (regulators themselves decide what counts as major, and it’s complicated) rather than the entire universe of them. The caveat that the analysis “include[s] only the benefits and costs for the minority of rules for which both those categories of impacts were estimated” is there.
As things stand, ranges of claimed annual costs and benefits for a total of 31 rules are as follows (in 2021 dollars):
- FY 2020: –$9.5 billion to –$4.5 billion in benefits and –$10.8 billion to –$7.0 billion in costs
- FY 2021: $9.8 billion to $12.2 billion in benefits and –$0.3 billion to –$0.1 billion in costs
- FY 2022: $25.2 billion to $48.2 billion in benefits and $16.9 billion to $19.4 billion in costs
We’ll take deeper dives on dollar costs and benefits later, but for the moment, let’s examine further the proportion of rules reviewed sporting cost and benefit documentation, and the implications.
The nearby preliminary chart (or link), “The Funnel of Gov: On the Depth of Regulatory Cost Review, 2001-Present” incorporates elements from the new 2020-23 report in the bottom three rows.
Among over 200 major rules reported and reviewed over the past three years, OMB notes only 31 rules with both costs and benefits quantified, and another 56 with costs alone quantified. Overall though, 9,778 rules big and small were issued in the Federal Register during the corresponding calendar years.
Looking over the entirety of the past couple decades, of the few hundred major rules that get reviewed by the Office of Management and Budget (OMB), about 37 percent sport quantitative cost estimates.
When we look beyond the officially self-designated major rules, the proportion of all rules with any reviewed cost analysis averages only around 0.58 percent, as the chart shows. Quantification for benefits fares worse.
The concern here is that many categories of costs simply never find their way into regulatory analyses in a manner sufficient to support benefit claims for the entire regulatory enterprise. For example:
The fundamental problem with the regulatory Report to Congress regime as currently configured, and especially as the climate within which it is created gets redefined by the Biden administration’s rewrite of so-called “Circular A-4” guidance on regulatory analysis, is that net-benefit analysis is oxygen for an ever-expanding government. Creative regulators can alternate between maximizing their vision of net benefits per Circular A-4 or claiming benefits “justify” costs as allowed by E.O. 12866 and amplified by Biden’s “Modernizing Regulatory Review” executive order.
In addition, cost‑benefit analysis is mute on questions like superior benefits that might have accrued if an agency’s “regulatory budget” allocation belonged instead to another agency; so there exists no genuine net-benefit pursuit adopting a perspective any wider than that of agencies acting in isolation.
Disclosure is paramount for both spending and regulation. We can look up the precise amount of the ballooning federal debt. But as for regulation, if societal benefits were to exceed costs, there isn’t any way anyone could actually know it.
We’re going to need a broader perspective on the regulatory cost-benefit front. Far too much is omitted to enable bold proclamations that regulations do more good than bad, even though we’ve had decades to practice.