The End of Centralized White House Regulatory Review: Don't Tweak EO 12,866, Repeal It

A series of catastrophic regulatory failures have focused attention on the weakened condition of regulatory agencies assigned to protect public health, worker and consumer safety, and the environment. The destructive convergence of funding shortfalls, political attacks, and outmoded legal authority have set the stage for ineffective enforcement, unsupervised industry self-regulation, and a slew of devastating and preventable catastrophes.  From the Deepwater Horizon spill in the Gulf of Mexico to the worst mining disaster in 40 years at the Upper Big Branch mine in West Virginia, the signs of regulatory dysfunction abound.  Many stakeholders expected that President Obama would move to reinvigorate the regulatory system, but he has not. In fact, he's gone so far as to adopt some anti-regulatory rhetoric, and suggesting that that alleged over-regulation contributes to the nation's economic woes.

One central reason for the systemic failure of effective health and safety regulation is that many regulatory matters enter and exit the White House through the Office of Management and Budget’s (OMB) little-known but extraordinarily powerful Office of Information and Regulatory Affairs (OIRA). Centralized White House regulatory review began during the Nixon administration and OIRA was created in 1980. Over four decades, the process has evolved into a gauntlet for public health, worker safety, and environmental protection initiatives,. Agencies doing their best to implement statutory mandates in a reasonable timeframe are subjected to withering rule-by-rule reviews.  The process is analogous to examining the branches of individual trees without realizing that they are part of a dying forest;  this myopia has obscured the causes and effects of regulatory failure for five presidents from both parties.

Executive Order 12,866 did not create OIRA, but it provides the rationale for its continued existence in the same way that a menu is the reason people travel to a restaurant. As I have argued elsewhere, the solution is not to tweak the EO, but to repeal it, leaving OIRA to fulfill its limited statutory missions—forestalling excessive paperwork, for example. The President can exert sufficient control over rulemaking through the political appointees he has selected to lead the agencies, and they can work on cross-cutting issues affecting more than one agency within the framework of the Domestic Policy Council.

The nation has embraced health, safety, and environmental regulation as an affirmative and important role for government.  Despite this broad support for regulatory schemes, deregulatory forces have managed to hobble the regulatory state through funding shortfalls, political interference, and neglect of the crucial job of updating the agencies’ statutory mandates. All of these efforts have been largely invisible to the voting public. But by the end of the George W. Bush administration, which pursued these techniques with a vengeance, regulatory agencies were on life support.

The worldwide recession President Bush bequeathed to President Obama had the effect of shoving the implications of this unacceptable state of affairs to the back burner. Even the nation’s fixation on the live video feed of the billowing plume of oil at the bottom of the Gulf of Mexico was not enough to elevate these issues. More recently, compounding pharmacies shipped intravenous drugs contaminated with meningitis to hospitals and clinics across the country; 64 people have died as a result. In an amazingly lackadaisical response to the problem, the House just passed  a bill that would allow compounders to choose whether to subject themselves to Food and Drug Administration (FDA) jurisdiction. Why? Because “market forces” would compel them to step up or lose their most responsible customers — never mind that one way they lose those customers appears to be by killing them off. 

OIRA and its precursors have served for four decades as the bottleneck for protective regulation, as its founders designed it and as its critics have long alleged it to be. It has systematically ignored the most important problems that affect the administrative state, including an ossified rulemaking process and acute agency dysfunction.  OIRA is tiny, and most staff members are economists with training in the details of cost-benefit analysis but scant experience in the other disciplines needed to inform policy making.  

The President and the nation would be far better served if he abandoned the effort to centralize control over individual regulations within the White House.  If this or any other President truly wants to “win the future,” OIRA’s myopia must give way to an affirmative vision of how government can protect those who truly cannot protect themselves.