Order Code IB95035
CRS Issue Brief for Congress
Received through the CRS Web
Federal Regulatory Reform: An
Overview
Updated January 6, 2000
Rogelio Garcia
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

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CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
Current Issues
Cost-benefit and Cost-effectiveness Analyses
Risk Assessment Analysis
Regulatory Budget
Congressional Review of Regulations
Judicial Review of Rulemaking
Moratorium on Regulations
Paperwork Reduction and Information Resources Management
Private Property “Takings”
Sunset of Regulations
Unfunded Mandates
Efforts to Reform Regulatory Process and Procedures
Executive Efforts to Reform the Process
Congressional Efforts to Reform the Process
Statutes Enacted to Reform the Process
Current Regulatory Policy and Procedure
LEGISLATION
FOR ADDITIONAL READING
CRS Issue Briefs
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Federal Regulatory Reform: An Overview
SUMMARY
Reforming the federal regulatory process
assure that regulations would be issued only
for developing and issuing regulations has
when needed and that they would be cost-
been an ongoing project of Congress and the
effective. All contained provisions requiring
President for the past three decades. The
use of cost-benefit analysis and centralized
significant increase during that period in the
review and clearance of regulations. Oppo-
number and scope of federal regulations and
nents succeeded in blocking the bills, primarily
regulatory programs dealing with health,
because they feared that existing social regula-
safety, and the environment has stimulated the
tions would be weakened. They also felt that
reform effort. These “social” regulations and
the new provisions would waste agency re-
regulatory programs, while providing substan-
sources and make it more difficult to issue
tial benefits, also impose significant costs.
needed regulations.
Achieving a proper balance between
While Congress has failed to pass a
costs, both in terms of dollars and of govern-
comprehensive regulatory reform bill, it has
ment intrusiveness, and benefits is at the heart
passed several other important measures,
of the debate over regulatory reform. Part of
including the Paperwork Reduction Act (1980-
the problem, however, is the lack of consen-
), Regulatory Flexibility Act (1980), Unfunded
sus over the actual costs and benefits of regu-
Mandates Reform Act (1995) and Small Busi-
lations, and how best to attain such data. The
ness Regulatory Enforcement Fairness Act
difficulty is compounded by the fact that cost-
(1996), which contains the Congressional
benefit analysis–the best tool for assessing
Review Act.
available data–relies on subjective assump-
tions, incomplete data, and other uncertainties.
During the same period, Congress passed
legislation deregulating various sectors of the
The most significant step in the effort to
economy, abolishing “economic” regulations
control regulatory costs occurred in 1981,
affecting telecommunications, transportation,
when President Reagan issued Executive
and other industries.
Order 12291. For the first time, federal agen-
cies were required to prepare a cost-benefit
Comprehensive procedural regulatory
analysis when developing regulations, and to
reform bills intended to produce more effi-
submit the regulations to the Office of Man-
cient, effective, and less costly regulations
agement and Budget for review and clearance.
will likely continue to be introduced and de-
President Clinton revoked the order in 1993,
bated in Congress. Contending factions re-
and in its place issued Executive Order 12866,
main split, however, over the degree of risk a
which incorporated, in slightly modified form,
society should reasonably tolerate regarding
the cost-benefit analysis and centralized re-
health, safety, and environmental matters.
view and clearance provisions found in E.O.
They are also divided over how best to deter-
12291.
mine and evaluate such risk. Given the deep
philosophical differences in Congress over the
Over the years, numerous comprehensive
issue, the fate of comprehensive regulatory
regulatory reform bills have been introduced in
reform remains unclear.
Congress. Bill proponents the bills sought to
Congressional Research Service ˜ The Library of Congress

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MOST RECENT DEVELOPMENTS

The Treasury and General Government Appropriations Act for FY 2000 (H.R. 2490),
which the President signed into law on September 29, requires OMB to issue an accounting
statement and associated report providing information on the costs and benefits of federal
regulations, both in the aggregate and for individual rules, and the impact of those rules on
state and local governments, small business, the economy, and other areas. To assure
uniformity, OMB is also required to issue guidelines to standardize measures of costs and
benefits, and the format of accounting statements. ( Treasury appropriations acts over the
last several years have contained identical provisions.) On December 7 the Senate
Governmental Affairs Committee reported out, with an amendment in the nature of a
substitute, S. 1198 (Truth in Regulating Act of 1999), which is designed to strengthen the
Congressional Review Act. The bill would require the General Accounting Office, at the
request of a congressional committee with legislative or oversight jurisdiction, to conduct
an independent evaluation of the cost-benefit analysis prepared by an agency when
developing and issuing major regulations.
BACKGROUND AND ANALYSIS
Federal agencies are authorized to issue regulations by their enabling statutes, statutes
establishing new programs, and statutes amending and extending the duties and
responsibilities of those agencies. Most regulations are issued informally, under the
notice-and-comment procedure established by the Administrative Procedure Act (APA). Less
commonly, some agencies must add such elements of adjudicatory proceedings as
cross-examination and rebuttal witnesses to the notice-and-comment requirements when
promulgating regulations. These agencies include the Federal Trade Commission, the
Consumer Product Safety Commission, and the Occupational Safety and Health
Administration. Very rarely, some agencies must conduct their rulemaking exercises in a
formal adjudicatory proceeding.
Informal notice-and-comment rulemaking requires that an agency publish a notice of
proposed rulemaking in the Federal Register; afford all interested persons an opportunity to
participate in the proceeding through the submission of written comments or, at the discretion
of the agency, by oral presentations; and, when consideration of the relevant matter presented
is completed, incorporate in the final rules “a concise general statement of their basis and
purpose.” A final rule must be published in the Federal Register “not less than 30 days before
its effective date.” Interested persons have the right to petition for the issuance, amendment,
or repeal of a rule. (See 5 U.S.C. 553). The APA does not specify a minimum period for
public comment. However, Executive Order 12866 requires a period of no less than 60 days.
An agency may extend or reopen the period for public comment at any time. Agencies are
also free to grant additional procedural rights to interested persons. Much of the bare bones
rulemaking requirements in the APA have been fleshed out in detail by federal court rulings
that have sought to make the rulemaking process more accessible to the interested public and
to assure fair and meaningful public input.
Over one hundred federal agencies, including units within those agencies, issue
regulations. Depending on their relationship to the President, the agencies may be divided
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into two categories, those subject to the President’s direction and control (executive
departments and independent agencies), and those relatively independent of such direction
and control (independent regulatory agencies). The independent regulatory agencies,
including, among others, the Consumer Product Safety Commission, Federal Energy
Regulatory Commission, Federal Reserve System, Federal Trade Commission, and Securities
and Exchange Commission, are listed under 44 U.S.C. 3502(5).
Approximately 75% of all regulations are issued by agencies over which the President
exercises considerable oversight and supervision, agencies which are subject to Executive
Order 12866. These agencies are also the ones issuing the more costly social regulations.
They include the Environmental Protection Agency, the Occupational Safety and Health
Administration and the Mine Safety and Health Administration (both in the Department of
Labor), the Food and Drug Administration (Department of Health and Human Services), the
Department of Energy, Department of the Interior, Department of Agriculture, and
Department of Transportation (especially the National Highway Safety Administration).
Regulatory reform has emerged as a major issue because of the significant increase over
the last 30 years in the number and scope of federal regulatory programs and regulations
dealing with health, safety, and the environment. These “social” regulatory programs and
regulations, while providing substantial benefits, also impose significant costs. Proponents
of comprehensive reform contend that federal regulations are too costly, intrusive, and
burdensome. They argue that the public and private resources needed to address problems
in health, safety, and environmental areas are limited; that those resources must be allocated
more efficiently to address the greatest needs of society in the most cost-effective manner, so
that the costs of regulations do not exceed the benefits. Finally, they contend that the existing
system tends to be overly risk conscious, and question what they perceive as the lack of
stringent analytical guidelines in the methodology used to assess risk hazards as well as costs
and benefits when developing regulations. These perceived shortcomings, they argue, result
in unnecessary, costly, and intrusive rules that impede economic growth and development.
Opponents of comprehensive change believe that some of the reform efforts focus too
much on costs and not enough on benefits. They argue that such efforts would hinder the
ability of regulatory agencies to safeguard the public’s health and safety, and to protect the
environment. Given the uncertainty regarding some of the risks involved, they contend it is
necessary to retain a relatively effective process that has helped to clean the environment and
avoid unforseen consequences. They assert that the existing methodology is adequate to
evaluate costs and benefits and that the proposed reforms would prevent or unnecessarily
delay needed regulations and impose additional costs on the agencies.
Several factors make it difficult to resolve existing differences regarding the need for
regulatory reform. First, the contending parties often disagree about the need for a particular
regulation. Second, the data necessary for effective use of risk assessment, cost-benefit, and
cost-effectiveness analyses — tools required for sound rulemaking — often are ambivalent
and incomplete. Finally, the above tools depend largely on assumptions and other subjective
factors, thereby exposing them to bias and manipulation. This issue brief describes specific
regulatory reform issues under consideration, provides an overview of current regulatory
processes, describes earlier efforts to reform the process, and lists major legislation designed
to reform the process.
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Current Issues
Efforts to reform the regulatory process have generally focused on the following ten
areas: (1) use of cost-benefit analysis and cost-effectiveness analysis when developing
regulations, especially regulations likely to impose costs of $100 million or more a year; (2)
use of risk assessment analysis to determine the probability of certain hazards occurring and
their adverse effects; (3) use of a regulatory budget to provide an overview of regulatory
costs and set a cap on those costs; (4) subjecting new regulations to review and possible
disapproval by Congress; (5) widening the scope of judicial review of regulatory actions; (6)
imposing a moratorium on new regulations while agencies review their existing regulations
to determine if they should be revised or abolished; (7) reducing and streamline the paperwork
required by regulations; (8) establishing a fair procedure for compensation of property owners
when all or some of their property is “taken” by a regulatory action; (9) establishing a sunset
mechanism whereby regulations or regulatory programs are terminated unless Congress or
the agency determines otherwise; and (10) restricting mandates imposed on state and local
governments unless federal funds are provided to offset the costs of those mandates. Each
of the areas is briefly discussed below.
Cost-benefit and Cost-effectiveness Analyses
The Unfunded Mandates Reform Act (2 U.S.C. 602 et. al.) contains a provision
requiring agencies, except for independent regulatory boards and commissions, to prepare a
cost-benefit analysis when developing a major regulation. Cost-benefit analysis involves a
systematic identification of all costs and benefits associated with a project, regulation, or
policy decision, including a full analysis of how those costs and benefits are distributed across
different groups in society. A full analysis recognizes that the quantitative assessments of
benefits and costs are necessarily uncertain and heavily dependent on numerous assumptions,
thus requiring qualitative analysis. Particularly difficult to quantify are long-term or uncertain
effects where suspected but subtle interactive effects are not well understood or directly
measurable. A regulatory requirement is judged to pass the test if the sum of future benefits
outweighs the sum of present and future costs in present value terms. The analysis is
extremely controversial when it seeks to rationalize inherent value trade-offs. Used carefully
and with adequate data, cost-benefit analysis can be an effective tool for assessing regulatory
costs. Cost-effectiveness analysis seeks to determine how a given goal can be achieved at the
least cost. In contrast to cost-benefit analysis, the concern is not with weighing the merits of
the goal, but with analyzing the costs of alternatives to reach that goal. It is a better tool than
cost-benefit analysis for uncovering those cases where large incremental costs result in minor
gains. A disadvantage, however, is that misjudgments in determining the goal or the budget
may go undetected.
Risk Assessment Analysis
Risk analysis is the systematic evaluation of the probability of certain hazards occurring
and their adverse effects. There are many different methods of analyzing risks, some
quantitative and some qualitative. The quality of the analysis depends on the adequacy of the
underlying data and the validity of the methods. As with cost-effectiveness and cost-benefit
analyses, risk analysis, carefully used and supported by adequate data, is a valuable
management tool in directing regulatory programs. Advocates state that risk analysis may be
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used as an objective, scientific basis for planning, identifying management strategies to
provide “a bigger bang for the buck,” or promoting risk comparisons to set priorities for
threats and target expenditures to achieve greater risk reduction. Controversy focuses on
how risk analysis should be used and the influence it should exert on health, safety, and
environmental decisions. Critics argue that risk analysis is not pure science and not entirely
objective, in part because of inadequate data regarding most chemicals, health effects, and
ecological effects. They also are concerned that risk analysis may oversimplify problems and
is easily manipulated. Risk analyses often focus on relatively small risks to the population as
a whole rather than larger risks to smaller groups. Cost-benefit analysis for environmental
and health regulations may use quantitative estimates of risk to assess benefits (i.e., risk
avoided), but quantitative analyses, critics claim, undervalue such benefits, especially when
they are in the distant future and exaggerate costs. They further contend that comparative
risk analysis is unscientific, and that priorities should not be based on risk alone.
Regulatory Budget
A regulatory budget is designed to improve regulatory accountability and control. Its
purpose is to force agencies to determine their regulatory priorities by 1) imposing an
analytical framework to provide an overview of the overall costs and benefits of regulations;
and 2) using such a budget to limit the total volume of regulatory programs, expenditures, and
compliance costs by setting a cap on the compliance costs each agency could impose on the
regulated sectors, both private and public. The regulatory budget concept has significant
bipartisan congressional support. There is disagreement, however, as to its appropriate
scope, content, or objective. Implementing a regulatory budget presents many conceptual and
empirical problems. These include the scope of regulation to be covered (almost all federal
programs involve some degree of regulation, the amount depending to some extent upon
one’s definition of regulation); cost estimates (direct and indirect, including the impacts on
firms, industries, and consumers, beyond compliance costs); benefit estimates (generally
regarded as more difficult than estimating costs); and overlap with state and local regulation.
Congressional Review of Regulations
The Congressional Review Act of 1997 (5 U.S.C. 801-808) requires agencies to send
their final regulations to Congress for review 60 days before they take effect. A regulation
may be rejected within the review period if Congress passes a joint resolution of disapproval
and the President signs it, or, if he vetoes the resolution Congress overrides the veto. Critics
of congressional review argue that it encroaches on agency independence, delays
unnecessarily the issuance of regulations, and requires an expertise that Congress does not
have. Proponents respond, however, that it enables Congress to make the final decision on
the need for specific regulations and makes agencies more sensitive to congressional intent.
Since the law’s enactment, seven joint resolutions of disapproval have been introduced, but
none has been passed.
Judicial Review of Rulemaking
The Administrative Procedure Act (5 U.S.C. 701-710) subjects agency actions to judicial
review except where a statute precludes such review or “where agency action is committed
to agency discretion by law.” Any person adversely affected or aggrieved by an agency action
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“within the meaning of the relevant statute” may challenge that action. Statutes containing
judicial review provisions applicable to rulemaking generally call for direct, pre-enforcement
review in the courts of appeals and usually specify requirements as to venue, timing of review,
and scope of review. Arguments over judicial review focus on two concerns: first, that lack
of such review may make agencies unaccountable; and second that broadening such review
may encourage frivolous challenges and perhaps undermine the rulemaking process because
of inadvertent errors, inability to obtain hard data, and subjective evaluations of data by
judges.
Moratorium on Regulations
Since 1981, there have been two moratoriums on regulations. In January 1981,
President Reagan declared a moratorium until March 31 on a group of so-called “midnight”
regulations, not yet in effect, issued at the end of the Carter Administration. Agencies were
directed to prepare cost-benefit analyses for major regulations in that group and submit them
to OMB for review and clearance. In January 1992, President Bush declared a 90-day
moratorium on regulations, later extended to the end of his Administration. During the
moratorium, agencies were directed to review major regulations to determine which could be
abolished or revised. Exempted from both moratoriums were regulations that responded to
an emergency; related to military or foreign affairs, or to agency organization, management
or personnel; dealt essentially with law enforcement; or were required by statutory or judicial
deadlines. Critics claimed that the moratoriums disrupted the regulatory process, delayed
needed regulations, and were ineffective. Supporters, on the other hand, claimed that the
moratoriums blocked unneeded regulations and enabled agencies to revise some regulations
that needed to be revised and to eliminate numerous regulations that were no longer needed.
Paperwork Reduction and Information Resources Management
The growth in regulations has imposed significant paperwork burdens on individuals,
businesses and organizations — both large and small — and state and local governments, and
has resulted in the Paperwork Reduction Act, as amended (44 U.S.C. 3501-3520). All agree
on the need to reduce the burden, which consumes an enormous amount of manpower and
cost of those affected. Proponents of paperwork reduction stress the need to streamline and
simplify the forms and reports that must be completed by those being regulated, and to
consolidate those forms and reports to avoid unnecessary duplication when several agencies
may be requiring similar information. The Office of Information and Regulatory Affairs in
OMB is the focus of the paperwork reduction effort because of its control over the
information collection activities of the executive agencies.
Private Property “Takings”
Much of the property rights debate focuses on two statutes: the Endangered Species
Act and the wetlands protection program under the Clean Water Act. Property rights
advocates adopt either of two principal approaches. One calls on federal agencies to establish
a procedure for assessing if their proposed actions are likely to result in takings under the
Fifth Amendment of the Constitution. President Reagan adopted this approach in 1988 when
he issued Executive Order 12630. The other approach calls for a statutory threshold to
stipulate when a federal agency must compensate a property owner as a result of agency
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action causing a loss in property value. Typically, the statutory approach is far more generous
to the property owner than the Fifth Amendment threshold, which in most cases requires a
severe diminution in property value before compensation is owed.
Sunset of Regulations
Sunset is a mechanism designed to force systematic review of existing regulations to
determine if they are needed. The concept requires the periodic termination of regulations
unless the agency decides that they are necessary. One variant of sunset provides for agency
review to determine if a regulation should be terminated. Another requires automatic
termination unless the agency decides otherwise. Sunset proponents believe that without an
automatic review mechanism, regulations will continue long after they are needed. Critics
agree that regulations should be reviewed periodically but contend that automatic termination
is not feasible because of the enormous workload it would place on the agencies.
Unfunded Mandates
Unfunded mandates are responsibilities or duties imposed by the federal government on
state and local governments without providing funding for the costs incurred. The issue
touches upon the proper role of federalism–the responsibility of the federal government to
establish priorities and national standards and the responsibility of local governments to
determine their own priorities and standards. Advocates of mandates that may incur costs at
the state and local levels contend that such mandates often are designed to address problems
found nationwide. They argue that regulations set uniform standards for all localities, and
that requiring localities in violation of law to pay at least some of the costs will motivate them
to cease such violations. State and local government officials, on the other hand, have
expressed alarm at the increasing cost of complying with the mandates. The Unfunded
Mandates Act (P.L. 104-2, 109 Stat. 48) seeks to address some of the issues raised by local
officials.
Efforts to Reform Regulatory Process and Procedures
Since the early 1970s, Congress and the President have struggled to lessen the
intrusiveness and control the cost of regulations. Much of the effort has centered on changing
rulemaking procedures to assure that agencies issue regulations only when needed, and that
regulations produce a net benefit and impose the least net cost to society. The struggle has
been contentious because of the deep differences over the procedural changes proposed.
Executive Efforts to Reform the Process
Presidents Nixon, Ford, and Carter directed agencies to consider costs and various
regulatory alternatives to reduce those costs when developing regulations. But it was E.O.
12291 that dramatically changed the procedure under which agencies develop and issue
regulations. E.O. 12291 directed agencies to employ cost-benefit analysis when developing
regulations and established centralized review of rulemaking, two features that are now basic
elements in the rulemaking process. It also directed agencies, to the extent permitted by law,
to issue only those regulations for which benefits outweigh costs and to prepare cost-benefit
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analyses when developing major regulations. To assure compliance, agencies were required
to submit their proposed and final regulations to OMB for review and clearance.
E.O. 12291 also directed agencies to continue publishing their semiannual agendas of
proposed regulations, which had been started in the Carter Administration. Regulations
responding to emergency situations and regulations with statutory or judicial deadlines were
exempted from the review and clearance procedures, although they had to be submitted to
OMB after they were issued.
In 1985, President Reagan issued Executive Order 12498 in an effort to improve the
coordination of regulatory activities and the management of the regulatory process. Agencies
were directed to prepare a yearly agenda containing all contemplated or planned regulatory
actions for the coming year. Except for emergency situations, agencies were prohibited from
taking any regulatory actions that had not been included in the agenda, unless those actions
were approved by OMB.
In 1989, concern about the continuing increase in the cost of regulations led President
Bust to establish the President’s Council on Competitiveness to oversee regulatory issues.
Chaired by Vice President Quayle, the Council focused on reducing the cost of new and
existing regulations. In January 1992, President Bush imposed a 90-day moratorium on
regulations and instructed the agencies to identify existing regulations and programs imposing
unnecessary regulatory burdens and to develop programs to reduce or eliminate those
burdens. Regulations issued in response to emergency situations, that had statutory or
judicial deadlines, dealt with military or foreign affairs, or related to agency administrative
matters, were exempted from the moratorium. The moratorium was extended, and remained
in force until the end of the Bush Administration.
When President Clinton assumed office in 1993, he took several major steps to reform
the regulatory process. In September 1993, the President issued Executive Order 12866,
which revoked E.O. 12291 and E.O. 12498, but, with some modification, incorporated the
major provisions of the two orders, in particular cost-benefit analysis and centralized review
and clearance of regulations by OMB. Independent regulatory boards and commission again
were exempted from the order.
President Clinton took several additional steps to address regulatory problems. Early
in 1993, he established the National Performance Review (NPR), a task force headed by the
Vice President, to evaluate government operations and management. NPR has generated
several reports designed to improve the regulatory process. On March 4, 1995, the President
instructed agencies to review their existing regulations and eliminate or revise those that were
outdated or otherwise in need of reform. He directed the agencies to deliver to him by June
1, 1995, a list of the regulations that they intended to eliminate or modify, and to indicate if
they could take such action administratively or if they needed legislative authority. According
to the NPR, the agencies submitted their reports to the White House and implemented many
of their recommendations. In April 1996, in a further effort to reduce regulatory costs to
small businesses, President Clinton directed agency heads to use their enforcement discretion
to waive all or a portion of a penalty for a regulatory violation that was corrected within a
reasonable time, or when the amount waived was used to correct the violation.
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Congressional Efforts to Reform the Process
In the late 1970s and early 1980s, Congress increasingly relied on the legislative veto to
block final regulations. Statutes applicable to several agencies and some programs made their
final regulations subject to either a one-house or two-house veto before they could be
implemented. During the period, numerous bills were introduced to enact a generic legislative
veto provision applicable to all regulations. Such efforts collapsed after the Supreme Court
ruled the legislative veto unconstitutional, because it violated bicameralism and the
“presentation” clause of the Constitution. (INS v. Chadha, 103 S.Ct. 2764. See also
Consumers Union, Inc., v. FTC and Consumer Energy Council of America v. FERC, 103
S.Ct. 3556, reinforcing the earlier decision.)
Over the years, Congress has considered numerous proposals to reform the regulatory
process. Major reform legislation contained provisions requiring agencies to prepare
cost-benefit analysis for their major regulations and centralizing review and clearance of those
regulations in OMB. Other provisions sought to establish regulatory budgets; sunset
regulations, programs, and agencies; revise and expand judicial review of regulatory actions;
and require federal reimbursement of state and local governments for costs incurred in
complying with federal regulations. While none of the comprehensive reform proposals
passed, several other important measures designed to reduce the cost and burden of
regulations were enacted, including the Paperwork Reduction Act of 1980, and the
Regulatory Flexibility Act of 1980.
The Paperwork Reduction Act, since amended, sought to minimize the cost and burden
imposed by federal paperwork requirements and to maximize the usefulness of the
information collected. It established the Office of Information and Regulatory Affairs
(OIRA) in OMB, making it responsible for reviewing and clearing agency information
collection requirements. OIRA also became the central clearing house for agency rulemaking
actions.
The Regulatory Flexibility Act (5 U.S.C. 601-612), since amended, directed agencies
to prepare analyses indicating how their regulations would impact on smaller entities,
including businesses, organizations, and state and local governments. The Act encouraged
agencies to tailor regulations so that they were less burdensome to smaller entities. Copies
of the analyses were to be sent for review and comment to the Office of Advocacy in the
Small Business Administration. The Act also required agencies to publish semiannual
regulatory agendas describing regulatory actions they are developing. Amendments in 1996,
discussed below, have strengthened the RFA.
Additional actions, begun in the 1970s, taken by Congress to reform the regulatory
process resulted in several statutes deregulating certain sectors of the economy, including
banking, telecommunications, and transportation. Economic deregulation has had a
significant effect on the economy. The impact has been massive and widespread, affecting
both the suppliers of those services and the consumers. Airline deregulation also resulted in
the elimination of the Civil Aeronautics Board. Economic deregulation efforts continued in
1995, when the Interstate Commerce Commission was abolished (P.L. 104-88).
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Statutes Enacted to Reform the Process
The Unfunded Mandates Reform Act of 1995 ( 2 U.S.C. 602) was one of several major
regulatory reform measures passed by the 104th Congress. The act requires agencies, except
for independent regulatory boards and commissions, to prepare cost-benefit and other
analyses, unless prohibited by law, for any regulation likely to result in costs of $100 million
or more in any year and the regulation’s affect on the national economy. The analysis is to
include the extent to which costs to state, local, and tribal governments may be paid with
federal funds. When developing such regulations, agencies must consider reasonable
alternatives and select the least costly, most cost-effective, or least burdensome of the
alternatives, or explain why such alternatives were not chosen. The act also allows for
judicial review, but only to redress agency failure to prepare written statements and analyses
accompanying regulations.
A second important measure passed was the Small Business Regulatory Enforcement
Fairness Act (SBREFA), (Title II, P.L. 104-121, 110 Stat. 847, 857-74), which incorporates
several regulatory relief laws under five subtitles, four of which seek to ease regulatory costs
and burdens on small entities. Subtitle A (110 Stat. 858) requires agencies issuing regulations
and the Small Business Administration to assist small businesses in understanding and
complying with those regulations. Subtitle B (110 Stat. 860) creates a Small Business and
Agriculture Regulatory Enforcement Ombudsman and Regional Small Business Regulatory
Fairness Boards to assist small businesses. In certain circumstances, it allows for reducing
or waiving civil penalties for violations of statutory or regulatory requirements. Subtitle C
(110 Stat. 862) amends the Equal Access to Justice Act by awarding attorney fees and court
costs to private parties, including large entities, if a court finds that an agency’s adversary
adjudication in a hearing is substantially in excess of the decision of the adjudicative officer,
as well as unreasonable when compared with such decision. The award is nullified, however,
if the party has committed a willful violation of law or otherwise acted in bad faith, or if
special circumstances make an award unjust.
Subtitle D (110 Stat. 864) amends the Regulatory Flexibility Act by removing the bar
to judicial review of an agency’s regulatory flexibility analysis. Federal courts may now order
corrective action regarding such analysis, and defer enforcement of a rule if they find the
analysis defective. Agencies also are required to send a proposed rule and copy of an initial
regulatory flexibility analysis, or a determination that such analysis is not required, to the
Small Business Administration for comment. In addition, a review panel consisting of
officials from the issuing agency, the Office of Information and Regulatory Affairs, and the
Chief Counsel for Advocacy in SBA are to consider the impact on small businesses of
regulations issued by the Environmental Protection Agency and the Occupational Safety and
Health Administration.
Subtitle E (110 Stat. 868), the Congressional Review Act, requires agencies to submit
new regulations to the Congress and the General Accounting Office (GAO) before they can
take effect. GAO is to prepare a report on each major rule, which it sends to Congress, to
assure that the agency has complied with procedural requirements regarding cost-benefit
analysis, regulatory flexibility analysis, and specified sections of the Unfunded Mandates
Reform Act. Congress has 60 session days in which to block the regulation by passing a joint
resolution of disapproval, which must be signed by the President. The regulation goes into
effect if the President vetoes the joint resolution and the veto is not overridden.
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The Paperwork Reduction Act of 1995 (P.L. 104-13, 109 Stat. 163-85) provided for a
6-year authorization of appropriations for OIRA, and required a 10% paperwork reduction
in FY1996 and FY1997, and requires a 5% reduction in each of the following four years.
Agencies are required to created an office responsible for ensuring compliance with
information policies and information resources management.
Finally, the Omnibus Consolidated Appropriations Act (P.L. 104-208, 110 Stat. 3009)
Title II, Section 645, directed OMB to submit to Congress by September 30, 1997, a report
estimating the cost and benefit of major regulations and of all federal regulatory programs.
The report was to analyze the direct and indirect impact of regulations on the private sector,
state and local governments, and the federal government, and to recommend regulations that
should be revised or eliminated.
The House of Representatives also took a unilateral step in its regulatory reform effort
by establishing a “Corrections Calendar” (H.Res. 168) designed to expedite the repeal of rules
and regulations deemed excessive or “dumb.” Bills reported favorably from committee may
be placed on the Corrections Calendar on the second and fourth Tuesday of each month. A
three-fifths vote is necessary to pass corrections legislation.
The above reforms have had mixed results. Two recent federal district court cases
indicate that agencies may no longer be able to ignore the provisions in the Regulatory
Flexibility Act that require them to consider the impact of their regulations on small entities.
In Northwest Mining Association v. Babbitt, 5 F.Supp. 2nd 9 (D.D.C. 1998), the court
overturned a regulation issued by the Bureau of Land Management because the BLM failed
to consider the impact on a small business. In Southern Fishing Association vs. Daley, 995
F.Supp. 1411 (M.D. Fla. 1998), the court overturned a regulation issued by the National
Marine Fishery Service for the same reason. On the other hand, both the Congressional
Review Act (CRA) and the Unfunded Mandates Reform Act (UMRA) have had limited
impact. No major rules have been rejected under the CRA, and agencies have been able to
issue major rules without preparing the cost-benefit analysis required by the UMRA.
The 105th Congress incorporated several incremental reform measures into FY 1998 and
FY1999 appropriations bills. The same provision directing OMB to prepare a report on the
costs and benefits of regulations in the FY1997 appropriations bill was also incorporated into
Title VI, Section 625 of the Treasury and General Government Appropriations Act for FY
1998 (P.L. 105-61). A similar provision, requiring more data on the cost of regulations and
peer review of such data, was also incorporated into the Omnibus Consolidated and
Emergency Supplemental Appropriations for FY1999. A second provision requires OMB to
issue guidance regarding the report to Congress of new rules under the Congressional Review
Act, including use of a standard new rule reporting form under the act, and how the agency
action is relevant to the Regulatory Flexibility Act and the Unfunded Mandates Act
.
Current Regulatory Policy and Procedure
Agencies develop and issue their regulations under the general framework of the
Administrative Procedure Act. In addition and more important, except for independent
regulatory boards and commissions, agencies fall under the more prescriptive provisions of
E.O. 12866, which require—
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! agencies to regulate only upon reasoned determination that benefits justify
costs;
! all significant (major) regulations to be submitted to OMB, but only
economically significant regulations require OMB review;
! agencies to choose regulatory objectives to address significant problems or
compelling public needs; to choose regulatory approaches that maximize net
benefits and minimize burdens for society and that are designed in the most
cost-effective manner;
! agencies to include in their annual regulatory plans comments regarding risk
analysis;
! agencies to periodically submit to OMB a plan to review existing regulations;
! the Vice President to play a more active, central role in the regulatory
process;
! a newly created Regulatory Working Group to serve as a forum to assist
agencies in identifying and analyzing important regulatory issues; and
! OIRA to disclose communications with agencies and private citizens
regarding rules submitted for review.
A significant regulation is defined as one that may—
! have an annual effect on the economy of $100 million or more, or adversely
affect in a material way the economy, a sector of the economy, productivity,
competition, jobs, the environment or public health or safety, or state, local,
or tribal governments or communities (regulations in this category are
considered economically significant, requiring detailed cost-benefit analyses
and OMB review);
! interfere with an action taken or planned by another agency;
! materially alter the budgetary impact of entitlements, grants, user fees, or
loan programs or the rights and obligations of recipients; or
! raise novel legal or policy issues arising out of legal mandates, the
President’s priorities, or the principles for regulatory planning and review
specified in the order.
Finally, each agency head is required to designate a Regulatory Policy Officer who is to
be involved in each stage of the regulatory process to further the aims of the order. The order
exempts, as did the one it replaced, regulations dealing with emergency situations, statutory
and judicial deadlines.
LEGISLATION
P.L. 106-58 (H.R. 2490 (Kolbe))
Treasury, Postal, and General Government Appropriations Act for FY 2000. Title VI,
sec. 628, requires OMB to submit, for 2001, an accounting statement and associated report
containing: 1) an estimate of total costs and benefits of federal rules and paperwork in the
aggregate, by agency and agency program, and by major rule; 2) an analysis of impacts of
federal regulations on state, local, and tribal government, small business, wages, and
economic growth; and 3) recommendations for reform. The provision also requires OMB to
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issue guidelines to agencies to standardize measures of costs and benefits, and also the format
of accounting statements. (An identical provision has been attached to Treasury
appropriations acts for earlier years.) Signed by President on Sept. 29, 1999.
H.R. 296 (Sweeney)
National Small Business Regulatory Assistance Act of 1999. Requires selected federal
agencies and representatives of an association representing a majority of small business
development centers (SBDCs) to agree to a small business regulatory compliance assistance
plan. Requires publication of guidelines for the establishment of a system of small business
voluntary regulatory compliance system and outlines the assistance to be provided to
participating small businesses. Introduced on Jan. 6, 1999, and referred to Small Business
Committee and Government Reform Committee.
H.R. 350 (Condit)
Mandates Information Act of 1999. Amends the Unfunded Mandates Reform Act to
require committee reports to include a statement from the Congressional Budget Office
(CBO) estimating the impact of private sector mandates on consumers, workers and small
businesses. If CBO cannot prepare an estimate, or if the legislation contains a private sector
mandate whose direct cost exceeds $100 million, a point of order may be raised on the floor
against consideration of the legislation. The point of order triggers a 20-minute debate on the
costs and benefits of the bill before the House votes to continue. Introduced on Jan. 19,
1999; Rules Committee reported it out, amended, (H. Rept. 106-5); passed House, amended,
on Feb.10; placed on calendar in Senate Mar. 3.
H.R. 391 (McIntosh)
Small Business Paperwork Reduction Act Amendments of 1999. Prohibits federal
agencies from imposing a civil fine on small businesses for a first-time violation of a
paperwork requirement, unless (1) the head of agency determines that the violation has
caused actual serious harm to the public, or that failure to impose a fine would impede or
interfere with the detection of criminal activity; (2) the violation involves certain tax matters;
and (3) the violation is not corrected within six months. If the head of agency determines that
a first-time violation presents an imminent and substantial danger to the public health or
safety, he or she may determine not to impose a civil fine if the violation is corrected within
24 hours, taking into account (1) the nature and seriousness of the violation, including
whether it is technical or inadvertent or involves willful or criminal conduct; (2) the actions
taken by the small-business concern regarding compliance; (3) previous compliance history
of the small-business concern; and (4) whether small-business concern has obtained a
significant economic benefit from the violation. The bill would also establish a task force to
study streamlining of paperwork requirements for small businesses. Introduced Jan. 19, 1999;
reported out by Government Reform Committee (H. Rept. 106-8, Part 1) passed House,
amended, on Feb. 11; referred to Senate Government Affairs Committee on Feb. 22.
H.R. 439 (Talent)
Paperwork Elimination Act. Requires agencies collecting information to enable
respondents to submit data electronically. Introduced Feb. 2, 1999; reported out by Small
Business Committee (H. Rept. 106-11, Part 1); passed House on Feb 9; referred to Senate
Committee on Government Affairs on Feb. 22.
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H.R. 574 (Pombo)
Science Integrity Act. Requires peer review of scientific data used in support of federal
regulations. Provides for the establishment of a list of impartial peer reviewers from which
department and agency heads would select reviewers for comment on proposed regulations.
Introduced in Feb. 4, 1999, and referred to Committee on Government Reform and to
Committee on Science.
H.R. 1074 (Bliley)
Regulatory Right-to-Know Act. Requires government-wide accounting of regulatory
costs and benefits, and for other purposes. Requires the President to submit no later than
February 5, 2001, and each year thereafter, an accounting statement and associated report
containing: 1) an estimate of the total costs and benefits of federal regulations and
paperwork– a) in the aggregate; b) by agency, agency program, and program component; and
c) by major rule; 2) an analysis of the impacts of federal regulations on a wide variety of
affected areas; 3) an analysis of any overlaps or duplications among regulatory programs; and
4) recommendations for reform. First accounting statement need not include estimates
regarding program components, and analyses of overlaps or duplications in regulatory
programs; first and second statements need not contain analyses of impacts on wages,
consumer prices, and economic growth. Before submission of the statement and report,
OMB is to provide for public notice and comment, and is to consult with the Congressional
Budget Office. OMB, in consultation with the Council of Economic Advisors, is also
required to issue guidelines to agencies to standardize measures of costs and benefits, and the
format of accounting statements. Finally, OMB is to arrange for independent, external peer
review of the guidelines, statements, and reports. A major rule is defined as a rule that results
in or is likely to result in (1) an annual effect on the economy of $1,000,000 or more; (2) a
major increase in costs or prices for consumers, individual industries, federal, state, or local
government agencies, or geographic regions; or (3) significant adverse effects on competition,
employment, investment, productivity, innovation, or in the ability of U.S.-enterprises in
domestic and export markets based enterprises to compete with foreign-based. Introduced
Mar. 11, 1999; reported out, amended, by Government Reform Committee (H. Rept. 106-
168; passed the House, amended, on July 27 and referred to Senate Governmental Affairs
Committee. (S. 59 is a similar bill on which the Governmental Affairs Committee held
hearings on April 22, 1999.)
H.R. 3311 (Gekas)
Regulatory Improvement Act of 2000. Requires, and defines, how agencies are to
prepare cost-benefit analysis for a major purposed rule, interim final rule, or final rule, as well
as for a reasonable number of alternative rules. Also requires a risk assessment if the primary
purpose of a rule is to address health, safety, or environmental risks. A major rule is defined
as one having a $100 million or more impact on the economy; adversely affecting the
economy or its sectors, the environment, public health or safety, or State and local
governments; or designated as such by the OMB Director. Sets out a schedule for a study
and report regarding comparative risk analysis. Introduced Nov. 10, 1999, and referred to
Judiciary and Commerce committees.
S. 246 (Hagel)
Private Property Rights Act of 1999. Establishes procedures to require federal agencies
to prepare a private property taking impact analysis, including estimate of potential federal
liability if the owner is to be reimbursed for the taking. Allows property owner to bring civil
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action in federal district court of in the U.S. Court of Federal Claims. Introduced on January
19, 1999, and referred to Governmental Affairs Committee.
S. 746 (Levin-Thompson)
The Regulatory Improvement Act of 1999. The bill codifies the requirements for cost-
benefit analysis and risk assessment for major rules, and executive oversight of the rulemaking
process. Major provisions require agency to: (1) prepare a cost-benefit analysis for rules
costing $100 million or that are otherwise designated by Office of Information and Regulatory
Affairs (OIRA) as having other significant impacts; (2) determine whether (i) benefits of rule
justify costs; (ii) rule is more cost-effective, or provides greater net benefits, than other
regulatory option; and (iii) rule adopts a flexible regulatory plan. If not, agency is to explain
why it selected the rule, including any statutory provision mandating it do so; (3) evaluate
benefits and costs of a reasonable number of reasonable alternatives that would achieve the
objective of the pertinent statute. Benefits are to include nonquantifiable factors in its
evaluation; (4) prepare a risk assessment if rule involves a risk to health, safety, or the
environment. OIRA, in consultation with the Office of Science and Technology Policy, is to
issue guidelines for risk assessments; (5) provide for independent peer review of risk
assessments and cost-benefit analyses for rules costing $500 million; and (6) include cost-
benefit analysis, cost-benefit determinants, and risk assessment in the rulemaking record,
which data is to be considered by a court only in determining whether final rule is arbitrary
and capricious. Court may remand or invalidate a rule if the agency fails to conduct a cost-
benefit analysis or risk assessment, or provide for peer review. OMB is to contract for a
study on comparison of risks to human health, safety and the environment, and a study to
develop a common basis for risk communication with respect to carcinogens and
noncarcinogens and the incorporation of risk assessments into cost-benefit analyses.
Introduced on Mar. 25, 1999; hearings held on Apr. 21 by Governmental Affairs Committee,
which reported bill out with amendments on July 20 (S. Rept. 106-110).
S. 1156 (Bond)
Small Business Advocacy Review Panel Technical Amendments Act of 1999. Amends
sec. 609(b) of the Regulatory Flexibility Act (5 U.S.C. 601-612), by adding the Internal
Revenue Service to the covered agencies (the Environmental Protection Agency and the
Occupational Safety and Health Administration) that must convene a Small Business
Advocacy Review Panel to receive advice and comments from small entities that will be
affected when the covered agencies are proposing a regulatory action. Introduced on May
27; Small Business Committee reported, with amendment, on Sept. 8 (S. Rept. 106-153).
(H.R. 1882 is nearly identical bill.) Passed Senate, amended, on Sept. 28.
S. 1198 (Shelby, Bond, and Lott)
Truth in Regulating Act of 1999. (Text below is from amended version of bill).
Establishes a 3-year pilot project requiring the General Accounting Office, at the request of
a committee with legislative or oversight jurisdiction, to evaluate and report on, within 180
days, the cost-benefit analysis accompanying an economically significant regulation and any
alternative approaches. An economically significant regulation is one that may have an annual
effect on the economy of $100 million or more, or adversely affect in a material way the
economy, a sector of the economy, productivity, competition, jobs, the environment, public
health or safety, or state, local, or tribal governments or communities). GAO is to evaluate
“the agency’s data, methodology, and assumptions used in developing” the regulation, and
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to explain “how any strengths or weaknesses in those data, methodology, and assumptions
support or detract from conclusions reached by the agency,” as well as the implications of
those strengths or weaknesses. The Comptroller General (CG) is to determine the priority
and number of committee requests to consider. To carry out the project, GAO is authorized
$5,200,000 for each of fiscal years 2000 through 2002. Before the 3-year period ends, the
CG is to recommend to Congress whether it should permanently authorize the pilot project.
Introduced on June 9, 1999, and referred to Governmental Affairs Committee; reported out
on Dec. 7 with amendment in nature of a substitute.
S. 1244 (Thompson, et al.)
Truth in Regulation Act of 1999. Introduced on June 18 and referred to the
Governmental Affairs Committee. (Language from this bill substituted into S. 1198.)
FOR ADDITIONAL READING
U.S. President (Clinton), “Regulatory Planning and Review,” Executive Order 12866,
Federal Register, vol. 58, September 30, 1993, p. 51735.
U.S. General Accounting Office. Regulatory Reform: Information on Costs, Cost-
Effectiveness, and Mandated Deadlines for Regulations. March 1995.
GAO/PEMD-95-18BR. [Washington] 49 p.
CRS Issue Briefs
CRS Issue Brief IB10004. Clean Air Act Issues in the 106th Congress.
CRS Issue Brief IB10003. Environmental Protection Legislation in the 106th Congress.
CRS Issue Brief IB94036. The Role of Risk Analysis and Risk Management in
Environmental Protection.
CRS Issue Brief IB89102. Water Quality: Implementing the Clear Water Act.
CRS Issue Brief IB97014. Wetland Issues in the 105th Congress.
CRS Reports
CRS Report RL30116. Congressional Review of Agency Rulemaking: A Brief Overview
and Assessment After Three Years.
CRS Report RL30326. Cost-Benefit Analysis of EPA Regulations: An Overview.
CRS Report 95-200. The Property Rights Issue.
CRS Report 95-760. Cost-Benefit Analysis: Regulatory Issues.
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CRS Report 96-949. Environmental Reauthorizations and Regulatory Reform: from the
104th Congress to the 106th.

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