May 1, 2009 by James Goodwin

Judicial Review and Cost-Benefit Analysis

For the last few years now, CPR’s Member Scholars have made the case that cost-benefit analysis is, by itself, fundamentally deregulatory in nature.  Unfortunately, other institutions in our federal government tend to exacerbate the deregulatory nature of cost-benefit analysis.  Whether by design or dumb luck, cost-benefit analysis allows regulatory opponents to use those institutions—most notably judicial review—to further their deregulatory agendas.

The Clean Air Mercury Rule (CAMR) case is a good example.  In February, the Supreme Court decided not to accept an appeal of a case on CAMR, which was the Bush Administration’s feeble regulatory plan for addressing air mercury pollution from power plants.  The story of CAMR demonstrates how judicial review has been used to amplify the deregulatory impact of cost-benefit analysis, and it's emblematic of the deregulatory synergy between cost-benefit analysis and judicial review.  This synergy typically plays itself out through a 4-step pattern that has repeated itself many times over the last few years.

In the first step, an environmental, health, or safety agency promulgates a rule, either preemptively or at the direction of OIRA, that is far weaker than what is called for under the relevant statute.  From beginning to end, the …

April 28, 2009 by Rena Steinzor

Inside the Washington Beltway, we are awash in stories about President Obama’s first 100 days. Some are comparative—how is Obama doing in relationship to Franklin Roosevelt at the same point in his first term? Some are pure spin—“we’re competent and we love each other!" opines Rahm Emanuel, the obviously biased Obama chief of staff. And some are substantive—has he kept his campaign promises and, if not, how many more miles does he have to go before he sleeps?

On the issues in our bailiwick, the President gets an “A” for effort, a “B” for execution, and an “incomplete” for the course as a whole.

First, the big picture. Just hearing a President talk about environmental protection again as if it were a very important item on the national agenda is enormously exciting, especially because the President has targeted climate change, the …

April 20, 2009 by Rena Steinzor

According to media accounts, President Obama today nominated Harvard law professor Cass Sunstein to be the director of OMB's Office of Information and Regulatory Affairs -- the so-called "regulatory czar."  CPR President Rena Steinzor reacts to the news:

I welcome Cass Sunstein’s nomination to be the Obama Administration’s regulatory czar. His past support for cost-benefit analysis as a method of regulatory impact analysis – even as practiced by the Bush Administration – raises a host of questions about the direction in which he’ll lead the Office of Information and Regulatory Affairs. The core issue: will Sunstein’s OIRA allow cost-benefit to continue to be a stumbling block for much-needed regulatory protections for health, safety and the environment? Will OIRA be a place where needed regulations get watered down and bottled up? Or, as I hope, will Professor Sunstein put his years of study of the issue …

April 3, 2009 by Thomas McGarity

On Wednesday, April 1, the Supreme Court issued its ruling in Entergy vs. EPA, holding that it was permissible for EPA to use cost-benefit analysis as its method of regulatory analysis in devising a regulation on power plant water intake structures.  Member Scholar Amy Sinden blogged on the decision that day, here.  Member Scholar Thomas McGarity adds a thought:

One of the most significant problems with cost-benefit analysis is its tendency to "dwarf soft variables." These "soft variables" are things that have value to all of us but are not typically traded in markets and are therefore difficult to quantify in any rigorous way. A good example of a soft variable is the value of the aquatic organisms that are not directly consumed by humans but will, along with those that are consumed by humans, be destroyed under the technology that EPA approved under the cost-benefit …

March 31, 2009 by Rena Steinzor

Two years ago, a pair of well-meaning economists, Richard Morgenstern and Winston Harrington, who work at the moderate think tank Resources for the Future (RFF) got a large grant from the Smith Richardson Foundation to convene a group of well-credentialed academics to consider how to improve “cost-benefit analysis” (CBA). Unfortunately, their long-awaited report, released at a briefing today is a mouse that tries to roar, but doesn’t quite. The reforms proposed in the final chapter – and that are never endorsed by the report’s contributing experts – are your grandma’s version of cost-benefit analysis. Rather than presenting bold ideas that might somehow have transformed the cost-benefit methodology into something that, if adopted, would not hamper – and eventually embarrass – the Obama Administration, it instead offers up only modest tweaks.

Cost-benefit analysis, or “CBA,” is a controversial method of regulatory analysis invented by economists, and it relies on …

March 26, 2009 by James Goodwin

More than 100 groups and individuals have accepted the invitation from the Office of Management and Budget (OMB) to comment on the new Executive Order on Regulatory Review that the Obama Administration is currently considering.  The extended submission deadline is March 31.  So far, the comments reflect a strikingly wide dividing line between regulatory opponents, on the one side, and individuals and groups committed to protecting the public’s interest in health, safety, and environmental sustainability, on the other.

On the side of regulatory opponents, many conservative scholars (e.g., W. Kip Viscusi and Matthew D. Adler), free market think tanks and advocacy groups (e.g., Center for Regulatory Effectiveness and the Heritage Foundation), and various trade associations (e.g., American Chemistry Council, American Petroleum Institute, and American Trucking Association) have submitted comments pressing their support for the current institution of centralized regulatory review—overseen by the …

March 17, 2009 by Rena Steinzor

The Office of Management and Budget (OMB) invited public comments on the design of its new Executive Order on regulatory review, and CPR has now submitted our recommendations.

We urged the Obama Administration to make fundamental changes in how OMB and prospective “regulatory czar” Cass Sunstein operate. We're hopeful that the new Administration will convert OMB from a regulatory Siberia into the guarantor of dramatically improved government protection of public health, safety, and the environment.

If we have learned anything from the financial meltdown paralyzing the world’s economy, it is that large industries should never be placed in the position of making money, controlling their own greed, and adopting ethics to protect the public interest all at the same time. Because the government cop was off the beat on too many fronts, strange new “derivatives,” toxic mortgage loans, hedge funds, and Ponzi schemes brought multi-billion multinationals …

Feb. 27, 2009 by Rena Steinzor

Late last week, I sent a letter to Peter Orszag, Director of the White House Office of Management and Budget that, among other things, called on OMB to allow for public participation in the design of its new Executive Order governing federal regulatory review. I’m happy to see that OMB has decided to do just that, with its announcement in Thursday’s Federal Register that it would “invite public comments on how to improve the process and principles governing regulation.”

As OMB observes, the White House has no obligation to seek public comment on executive orders. The Federal Register notice says:

Executive Orders are not subject to notice and comment procedures, and as a general rule, public comment is not formally sought before they are issued. In this case, however, there has been an unusually high level of public interest, and because of the evident importance …

Feb. 24, 2009 by Matthew Freeman

Time Magazine has a piece this week on Cass Sunstein’s likely nomination to be the Obama Administration’s “regulatory czar” (director of the Office of Information and Regulatory Affairs) and the debate over the use of cost-benefit analysis it has touched off. Despite Professor Sunstein's progressive views on most issues, progressives are concerned that his methods of regulatory analysis, if and when he’s confirmed, may not differ significantly from those used during the Bush years. The Time story, here, captures the budding debate.

Feb. 20, 2009 by James Goodwin

In recent weeks, an unusual convergence of events has served to elevate somewhat the public profile of cost-benefit analysis (CBA).  Before then, CBA was an obscure and highly complex tool of policy analysis—the kind of thing that hardcore policy wonks would wonk about when the subjects of their usual policy wonkery weren’t wonkish enough.  Foreseeable future events suggest that the public profile of CBA will continue to rise.

The process began in early January when word emerged from the Obama transition team that the then-President-Elect planned to name Harvard law professor Cass Sunstein to head the Office of Information Regulatory Affairs (OIRA).  A little known but powerful bureau in the White House Office of Management and Budget (OMB), OIRA supervises the entire federal regulatory apparatus, imposing its will by individually reviewing all major federal regulations through the lens of CBA.  OIRA’s use of CBA …

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