Biden Chooses a Pragmatic Path for Regulation

Amid the flurry of new executive orders and memoranda signed by President Joe Biden on his first day in office, there’s a sleeper.

It’s called Modernizing Regulatory Review, and it’s exceedingly important.

Crucially, the memorandum affirms the long-standing process managed by the Office of Information and Regulatory Affairs, which includes a significant role for cost-benefit analysis. At the same time, it marks a dramatic departure from the approach favored by the administration of former President Donald Trump and identifies excellent directions for fresh reforms.

Since 1981, both Republican and Democratic presidents have directed agencies to submit drafts of their major regulations to OIRA — part of the Office of Management and Budget — for review and scrutiny. Whether the issue involves environmental protection, food safety, homeland security, health care or transportation, agencies must allow OIRA to coordinate a process called interagency review, by which various parts of the federal government are permitted to comment on draft regulations.

For regulations with an economic impact of $100 million or more, agencies must also produce a regulatory impact analysis, cataloguing the benefits and costs of regulations, and showing that the benefits justify the costs.

Though strongly supported by presidents of both parties, the process has been challenged by both right and left. Some conservatives have wanted harder brakes on regulation, like a regulatory budget (adopted by Trump) and a requirement that for every new regulation, two must be taken away (also adopted by Trump). Some progressives have wanted to eliminate or scale back the OIRA process, to reduce the role of cost-benefit analysis, to emphasize values that are hard to quantify (such as human dignity), and to make it clear that distributional considerations matter.

Not surprisingly, Biden revoked Trump’s harder brakes on Wednesday. At the same time, his memorandum on regulatory reform embraces what is good in the status quo while also acknowledging that improvements can be made by responding to the strongest parts of the progressive critique. 

It’s noteworthy that Biden explicitly reaffirmed the principles of a 2011 order by President Barack Obama, which requires agencies to promote public participation and “the open exchange of information and perspectives”; to respect scientific integrity; and to engage in retrospective review of existing regulations, rethinking those that are “outmoded, ineffective, insufficient, or excessively burdensome.” That 2011 order explicitly requires agencies to consider “human dignity” when they make rules.

It also contains a provision, informed by behavioral economics, mandating consideration of flexible approaches, such as “warnings, appropriate default rules, and disclosure requirements as well as provision of information to the public in a form that is clear and intelligible.”

Still, Biden’s memorandum goes far beyond affirmation of the status quo. It calls for recommendations from the budget director on how to “take into account the distributional consequences of regulations” in an effort to “ensure that regulatory initiatives appropriately benefit and do not inappropriately burden disadvantaged, vulnerable, or marginalized communities.”

That’s important. Suppose that a new regulation would mostly help vulnerable people in dangerous occupations, perhaps by preventing premature deaths. That should be taken into account. Under current practice, it often is — but not always.

It’s also possible, of course, that a new regulation would impose serious burdens on disadvantaged people, perhaps by raising costs or reducing jobs. That, too, should be taken into account.

Biden’s memorandum also asks the budget director to explore how OIRA can act to promote sensible regulations, not only to stop senseless ones. Especially now, when new initiatives will be needed to protect public health and to combat discrimination, that is a key role to highlight.

Progressives have rightly emphasized the need to account for benefits that are difficult or impossible to quantify, and Biden’s memorandum requires the budget director to consider that need. If a regulation reduces sexual harassment in the workplace, or helps disabled people work, its dollar benefits might not be easy to calculate, but they are real.

It’s also important to ensure that the OIRA process is efficient (not too slow!), transparent and inclusive — and Biden calls for recommendations on those issues as well.

That’s also a good idea, though it raises tricky issues. When the OIRA process is slow, it’s usually not because of OIRA itself, but because a senior official within the executive branch (possibly the attorney general, possibly the president personally) has concerns about a regulation.

OIRA is often a coordinator, trying hard to find an approach that will accommodate competing points of view. Progressive critics often miss this point and blame OIRA itself for the delay, when OIRA wishes things could go faster and is trying mightily to move the process along. Still, it’s correct to say that speedier can be better, especially for life-saving regulations, and that more transparency and inclusiveness could increase legitimacy.

Whatever happens in the coming months, a lot of the administration’s work is going to go through OIRA. Biden’s memorandum sets just the right direction — and establishes just the right tone.

I was administrator of the Office of Information and Regulatory Affairs during the first term of the Barack Obama administration.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Cass R. Sunstein is a Bloomberg Opinion columnist. He is the author of “Too Much Information” and a co-author of “Nudge: Improving Decisions About Health, Wealth and Happiness.”

©2021 Bloomberg L.P.

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