Federal Regulatory Reform: An Overview

Federal Regulatory Reform: An Overview

Order Code IB95035
CRS Issue Brief for Congress
Received through the CRS Web
Federal Regulatory Reform:
An Overview
Updated May 22, 2001
Rogelio Garcia
Government and Finance Division
Congressional Research Service ˜ The Library of Congress

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 Recently 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 process for devel-
requiring use of cost-benefit analysis and
oping and issuing regulations has been an
centralized review and clearance of regula-
ongoing project of Congress and the President
tions. Bill proponents have argued that such
for the past three decades. The significant
reform would assure that regulations would be
increase during that period in the number and
issued only when needed and that they would
scope of federal regulations and regulatory
be cost-effective. Opponents have resisted the
programs dealing with health, safety, and the
proposed changes because of their concern
environment has stimulated the reform effort.
that existing social regulations would be weak-
These “social” regulations and regulatory
ened. They also have maintained that the new
programs, while providing substantial benefits,
provisions would waste agency resources and
also impose significant costs.
make it more difficult to issue needed regula-
tions.
Achieving a proper balance between
costs, both in terms of dollars and of govern-
While Congress has not passed a compre-
ment intrusiveness, and benefits is at the heart
hensive regulatory reform bill, it has passed
of the debate over regulatory reform. Part of
several other important measures, including
the problem, however, is the lack of consen-
the Paperwork Reduction Act (1980), Regula-
sus over the actual costs and benefits of regu-
tory Flexibility Act (1980), Unfunded Man-
lations, and how best to attain such data. The
dates Reform Act (1995), Congressional
difficulty is compounded by the fact that cost-
Review Act, which is part of the Small Busi-
benefit analysis–the best tool for assessing
ness Regulatory Enforcement Fairness Act
available data–relies on subjective assump-
(1996), and Truth in Regulating Act (2000).
tions, incomplete data, and other uncertainties.
During the same period, Congress passed
The most significant step in the effort to
legislation deregulating various sectors of the
control regulatory costs occurred in 1981,
economy, abolishing “economic” regulations
when President Reagan issued Executive
affecting telecommunications, transportation,
Order 12291. For the first time, federal agen-
and other industries.
cies were required to prepare a cost-benefit
analysis when developing regulations, and to
Comprehensive procedural regulatory
submit the regulations to the Office of Man-
reform bills likely will continue to be intro-
agement and Budget for review and clearance.
duced and debated in Congress. Contending
President Clinton revoked the order in 1993,
factions remain split, however, over the degree
and in its place issued Executive Order 12866,
of risk a society should reasonably tolerate
which incorporated, in slightly modified form,
regarding health, safety, and environmental
the cost-benefit analysis and centralized review
matters. They are also divided over how best
and clearance provisions instituted by E.O.
to determine and evaluate such risk. Given the
12291.
deep philosophical differences in Congress
over the issue, the fate of comprehensive
Over the years, numerous comprehensive
regulatory reform remains unclear.
regulatory reform bills have been introduced in
Congress. The bills have contained provisions
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MOST RECENT DEVELOPMENTS
The regulatory reform area has been relatively quiet since March 20, when President
Bush signed into law (P.L. 107-5, 115 Stat. 7) S.J.Res. 6, a joint resolution of disapproval
to overturn ergonomics standards recently issued by the Occupational Safety and Health
Administration. Under the Congressional Review Act (CRA) of 1996, a regulation issued
by a federal agency may be overturned if, within 60 legislative days, Congress passes and
the President signs a joint resolution of disapproval, or, if the President vetoes the joint
resolution and Congress overrides the veto. Industry groups supported the resolution,
expressing concern over the likely cost and reach of the ergonomics regulations. Labor
leaders opposed the resolution, arguing that the regulations were needed to protect the
health and safety of workers. This is the first time that CRA has been used to disapprove a
regulation.
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 rule a detailed, comprehensive statement of its 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
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,
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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 90% of all regulations are issued by agencies subject to Executive Order
12866, agencies over which the President exercises considerable oversight and supervision.
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 many federal regulations are too costly and intrusive.
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 protect public health and
the environment, avoiding the unforseen consequences of sweeping regulatory change. They
assert that the methodology that agencies currently use 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 and the public.
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 modify 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 streamlining 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. Most observers
believe that 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. Cost-effectiveness analysis is commonly seen as 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
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management tool in directing regulatory programs. Advocates state that risk analysis may be
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 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
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 to achieve than estimating costs); and overlap with state and local regulation.
Congressional Review of Regulations
The Congressional Review Act of 1996 (5 U.S.C. 801-808) requires agencies to send
their final regulations to Congress for review 60 legislative 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. The act was used for the first time this year to overturn an ergonomics rule issued by
the Occupational Safety and Health Administration. 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.
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 three moratoriums on regulations. Two of the moratoriums
were issued by incoming Presidents (1981 and 2001) who wanted to review and possibly
block regulations issued at the end of the outgoing administrations. All three moratoriums
exempted regulations issued by independent regulatory boards and commissions, as well as
regulations issued in response to emergency situations or statutory or judicial deadlines.
Independent regulatory boards and commissions were exempted from the moratoriums, but
were requested to participate in the review on a voluntary basis. Critics claim that
moratoriums disrupt the regulatory process, delay needed regulations, and are ineffective.
Supporters, on the other hand, assert that moratoriums help to block unneeded regulations
and enable agencies to revise regulations that need to be revised and eliminate those that are
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 manhours and imposes costs on 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. Other observers, however, argue that without adequate information from
regulated entities or program beneficiaries agencies may not be able to effectively carry out
their mandates. 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
action causing a loss in property value. Typically, the statutory approach is far more generous
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to the property owner than the Fifth Amendment threshold, which in most cases requires a
major 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 contend that mandates often are
designed to address state and local problems found nationwide. 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. 104-4, 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
President Reagan’s Executive Order 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 prepare cost-benefit analyses when
developing major regulations and to issue only regulations whose benefits outweigh their
costs. To assure compliance, agencies were required to submit their proposed and final
regulations to OMB for review and clearance.
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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
Upon assuming office, President Reagan declared a 60 day moratorium 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 to submit them to OMB for review and clearance.
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
Bush 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, which 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. 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.
Upon assuming office on January 20, 2001, President George W. Bush directed that no
new or proposed regulations be published until reviewed and cleared by one of his appointees,
that regulations sent to the Office of the Federal Register at the end of the Clinton
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Administration that had not yet been published be returned to the issuing agency for review
and approval, and that the effective date of those regulations that had been published but not
yet taken effect be postponed for 60 days. Regulations issued by Independent regulatory
boards and commissions were exempted from the moratorium, as were regulations issued in
response to a health or safety emergency or legislative or judicial deadline.
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
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the elimination of the Civil Aeronautics Board. Economic deregulation efforts continued in
1995, when the Interstate Commerce Commission was abolished.
Statutes Enacted Recently 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 to
prepare a cost-benefit and other assessment before issuing (1) any general notice of proposed
rulemaking likely to result in any rule that includes any Federal mandate likely to result in
expenditures of $100,000,000 or more in any year, and (2) any final rule for which a general
notice of proposed rulemaking was published. (The act exempts independent regulatory
boards and commissions.) The assessment 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
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analysis, regulatory flexibility analysis, and specified sections of the Unfunded Mandates
Reform Act. Congress has 60 legislative days in which to block a regulation by passing a
joint resolution of disapproval. The resolution becomes law if it is signed by the President,
or, if a presidential veto is overridden. An agency may not issue a regulation that is
substantially the same as one that has been disapproved by a joint resolution, unless the action
is specifically authorized by a law enacted after the disapproval of the original regulation.
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.
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. Appropriation act riders over the last several years have
required OMB to continue submitting an annual report on the cost and benefit of federal
regulations, as well as to issue guidelines to agencies that would standardize measures of
costs and benefits and the format of accounting statements.
Finally, the Truth in Regulating Act of 2000 (P.L. 106-312, 114 Stat. 1248-1250),
requires the General Accounting Office (GAO) to independently evaluate the cost-benefit
analysis prepared by agencies when they develop a regulation. When an agency publishes an
economically significant rule, whether proposed or final (including an interim or direct final
rule), a chairman or ranking member of a committee of jurisdiction of either House, may
request the GAO to review and report on the rule within 180 days. An economically
significant rule is defined as any rule having an annual effect on the economy of $100 million
or more, or adversely affecting in a material way the economy, a sector of the economy, or
other specified sectors. The report is to include an independent evaluation of the agency’s
analysis of potential benefits and costs, or other analysis required, any alternative approaches
considered in the rulemaking, as well as a summary of the results and the implications of those
results. GAO is to evaluate the agency’s data, methodology, and assumptions used in
developing the rule, and to explain how any strengths or weaknesses in those data,
methodology, and assumptions support or detract from conclusions reached by the agency,
and the implications of those strengths or weaknesses. GAO review is contingent upon
receiving yearly appropriations of $5,200,000 for such review. Within three years, the
Comptroller General is to recommend to Congress whether it should permanently authorize
the act.
In 1995, the House of Representatives also took a unilateral step at regulatory reform
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.
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The above reforms have had mixed results. Congress used the Congressional Review
Act (CRA) in March 2001 to disapprove, for the first time, a newly issued regulation. The
joint resolution to disapprove an ergonomics regulation issued by OSHA became law because
the President favored the action. Earlier, two federal district court cases confirm that
agencies cannot 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 the Unfunded Mandates Reform Act (UMRA) has had limited
impact as agencies have been able to issue major rules without preparing the cost-benefit
analysis required by the UMRA. The reports issued by OMB estimating the costs and
benefits of federal regulations have been incomplete, and its benefits estimates have been
questioned. In a 1999 report, the General Accounting Office (GAO) concluded that Congress
may have to look elsewhere if it “wants an independent assessment of executive agencies’
regulatory costs and benefits . . .” Congress appears to have done that under the Truth in
Regulating Act.
Current Regulatory Policy and Procedure
While agencies develop and issue their regulations under the general framework of the
Administrative Procedure Act, except for independent regulatory boards and commissions,
the more prescriptive provisions of E.O. 12866, require that—
! agencies regulate only upon reasoned determination that benefits justify
costs;
! significant (major) regulations be submitted to OMB, but only economically
significant regulations require OMB review. Agencies are required to
choose regulatory objectives to address significant problems or compelling
public needs; choose regulatory approaches that maximize net benefits and
minimize burdens for society and that are designed in the most cost-effective
manner;
! agencies include in their annual regulatory plans comments regarding risk
analysis;
! agencies periodically submit to OMB a plan to review existing regulations;
! the Vice President play a more active, central role in the regulatory process;
! a newly created Regulatory Working Group serve as a forum to assist
agencies in identifying and analyzing important regulatory issues; each
agency designate a Regulatory Policy Officer who is to be involved in each
stage of the regulatory process; and OIRA disclose communications with
agencies and private citizens regarding rules submitted for review;
! regulations dealing with emergency situations, statutory and judicial
deadlines, and regulations issued by independent regulatory boards and
commissions be exempted from the order.
A significant regulation is defined as one that may—
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! 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.
LEGISLATION
P.L. 107-5, 115 Stat. 7, S. J. Res. 6 (Nicholas et. al.)
A joint resolution of disapproval providing for congressional disapproval of the rule
submitted by the Department of Labor under chapter 8 of title 5, United States Code, relating
to ergonomics. Signed into law on March 20.
H.R. 105 (Hayworth)
Congressional Responsibility Act of 2001. Requires Congress and the President to fulfill
their constitutional duty to take personal responsibility for Federal laws. Introduced on Jan.
3, 2001, and referred to the Committee on the Judiciary and the Committee on Rules.
H.R. 203 (Sweeney)
National Small Business Regulatory Assistant Act of 2001. Directs the Administrator
of the Small Business Administration to establish a pilot program to provide regulatory
compliance assistant to small business concerns, and for other purposes. Introduced on Jan.
3, 2001, and referred to the Small Business Committee.
H.R. 212 (Sweeney)
Private Property Protection Act of 2001. Seeks to ensure that Federal agencies establish
appropriate procedures for assessing whether or not regulations might result in the taking of
private property, and directs the Secretary of Agriculture to report to Congress regarding
such takings under programs of the department.
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. Executive Office of the President. Office of Management and Budget. Report to
Congress on the Costs and Benefits of Federal Regulations: 2000 Report. At
[http//www.whitehouse.gov/OMB/inforeg/index.html].
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U.S. General Accounting Office. Regulatory Accounting: Analysis of OMB’s Reports on the
Costs and Benefits of Federal Regulation. April 1999. GAO/GGD-99-59.
[Washington] 76 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 95-760. Cost-Benefit Analysis: Regulatory Issues.
CRS Report 96-949. Environmental Reauthorizations and Regulatory Reform: From the
104th Congress to the 106th.
CRS Report RL30183. Federal Regulations and the Federal Register: Statistical
Measurements, 1976-1999.
CRS Report RS20493. Property Rights: House Judiciary Committee Reports H.R. 2372.
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