Federal Regulatory Reform: An Overview

January 29, 2003 RL31207

Order Code RL31207
Report for Congress
Received through the CRS Web
Federal Regulatory Reform: An Overview
Updated January 29, 2003
Gary L. Galemore
Analyst in American National Government
Government and Finance Division
Congressional Research Service ˜ The Library of Congress
Federal Regulatory Reform: An Overview
Summary
Federal regulation can be defined broadly as federal requirements, directives,
standards, or procedures, backed by the use of penalties or other sanctions, intended
specifically to modify the behavior of state and local governments, private
institutions, businesses, and individuals. Congress and the President have made
numerous attempts to reform government regulation over the last 3 decades.
Regulatory reform efforts have centered on several policy issue areas that include
requiring agencies to prepare cost-benefit and cost-effectiveness analyses for major
regulations, centralizing mandatory review and clearance of new regulations, setting
expiration dates on regulations (forcing a new review of a regulation before it is
continued), and expanding the role of judicial review.
The heart of the debate over regulatory reform is the tension between the costs
imposed by federal regulations, in terms of both dollars and government
intrusiveness, and protecting public health, safety, and the environment. Several
factors have made it troublesome to resolve regulatory issues and to pass
comprehensive regulatory reform. The difficulty is compounded by the fact that cost-
benefit analysis, cost-effectiveness analysis, and risk-assessment analysis, primary
tools used by regulators, rely on subjective assumptions, incomplete data collection,
and other uncertainties.
In its efforts to address regulatory issues, Congress has enacted laws to lessen
the regulatory burden and intrusiveness of federal regulation. These laws include the
Paperwork Reduction Act, the Regulatory Flexibility Act, the Unfunded Mandates
Reform Act, the Small Business Regulatory Enforcement Fairness Act, and the
Congressional Review Act, among others.
The purpose of this report is to provide Congress with an overview of regulatory
reform efforts and a summary of regulatory issues. The report also briefly describes
what issues have been most contentious and prevalent over the last decade or more,
and what Presidents have attempted, on their own authority, to evaluate better both
the necessity and the costs of regulations. Also discussed are laws passed by
Congress that have a direct or indirect impact on the regulatory process, those that
affect the analysis of the costs and benefits of regulations, and other laws that allow
for congressional, executive, and judicial review of regulations.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Current Administrative Process
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Cost-Benefit and Cost-Effectiveness Analyses . . . . . . . . . . . . . . . . . . . . . . . 5
Risk Assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Regulatory Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Congressional Review
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Judicial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Moratoriums on Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Paperwork Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Private Property “Takings” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Sunset of Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Unfunded Mandates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Negotiated Rulemaking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Federal Efforts to Reform the Regulatory Process . . . . . . . . . . . . . . . . . . . . . . . . 10
Presidential Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Congressional Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Regulatory Flexibility Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Negotiated Rulemaking Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Paperwork Reduction Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Unfunded Mandates Reform Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Small Business Regulatory Enforcement Fairness Act . . . . . . . . . . . . 14
Regulatory Compliance Simplification . . . . . . . . . . . . . . . . . . . . . . . . 14
Regulatory Enforcement Reforms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Equal Access to Justice Act Amendments . . . . . . . . . . . . . . . . . . . . . . 14
Regulatory Flexibility Act Amendments . . . . . . . . . . . . . . . . . . . . . . . 15
Congressional Review Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Omnibus Consolidated Appropriations Act . . . . . . . . . . . . . . . . . . . . . 15
Truth in Regulating Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
For Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
CRS Issue Brief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
CRS Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Other Readings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Selected World Wide Web Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Federal Regulatory Reform: An Overview
Introduction
Since the 1970s, Congress and the President have struggled to lessen the
perceived intrusiveness and cost of federal regulations issued by over 100 federal
agencies.1 Federal regulation can be defined broadly as federal requirements,
directives, standards, or procedures, backed by the use of penalties or other sanctions,
intended specifically to modify the behavior of state and local governments, private
institutions, businesses, and individuals. A significant increase during the last 3
decades in the number,2 scope, and reach of federal regulations and regulatory
programs has drawn criticism and stimulated much of the reform effort. On the other
hand, those who perceive benefit from federal regulations are effective supporters.
Regulations and agencies promulgating regulations relating to public health, safety,
and the environment, the so-called “social” regulations and regulatory programs,
while providing substantial protections, have also imposed a significant costs on the
economy.
Regulatory reform efforts have required agencies to prepare cost-benefit and
cost-effectiveness analyses for major regulations, centralized mandatory review and
clearance of new regulations in the Office of Management and Budget (OMB),
established termination dates for certain regulations and regulatory agencies, and
expanded judicial review of regulations.
Although Congress has not reached agreement on a single, comprehensive,
regulatory reform bill, it has enacted several relevant measures, including the
Paperwork Reduction Act,3 the Regulatory Flexibility Act,4 the Unfunded Mandates
Reform Act,5 the Small Business Regulatory Enforcement Fairness Act,6 and the
Congressional Review Act.7 Congress has also passed legislation deregulating
specific sectors of the economy previously regulated by government. For example,
1 Jeffrey S. Lubbers, A Guide to Federal Agency Rulemaking (Chicago: ABA Publishing,
1998).
2 New and revised regulations have numbered, on average, around 1,600 per year for the last
20 years. Only 4% to 8% are new regulations, depending on the year specified. For
additional information on this subject, see CRS Report RL30183, Federal Regulations and
the Federal Register: Statistical Measurements, 1976-1999, by Rogelio Garcia.
3 94 Stat. 2812; Dec. 11, 1980; recodified at 109 Stat. 163; 44 U.S.C. 3501 et seq.
4 94 Stat. 1164; Sept. 19, 1980; 5 U.S.C. 601 note.
5 109 Stat. 48; Mar. 22, 1995; 2 U.S.C. 1501 et seq.
6 110 Stat. 857; Mar. 29, 1996; 5 U.S.C. 601 note.
7 110 Stat. 868; Mar. 29, 1996; 5 U.S.C. 801 et seq.
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deregulation has occurred relating to telecommunications, transportation, and other
industries.
Regulatory activity, whether within Congress, where bills are introduced each
year calling for more or less regulation, or within the executive branch, where dozens
of agencies propose, change, discontinue, or finalize regulations, may remain
vigorous in the coming decades. In the absence of a consensus on a comprehensive
regulatory reform bill, smaller scale reform efforts are likely to continue. Contending
factions remain split, however, over the degree of risk a society should reasonably
bear regarding health, safety, and environmental matters, as well as how best to
determine and evaluate such risk.
This report provides a brief overview of regulatory reform efforts. It describes
what issues have been most controversal and prevalent and what Presidents have
attempted, on their own authority, to evaluate better the necessity and costs of
regulations. Laws passed by Congress that have either a direct or an indirect impact
on the regulatory process or allow for more formal analysis of costs and benefits of
regulations, and those that require congressional, executive, and judicial review of
regulations are also discussed.
Current Administrative Process
Federal agencies are authorized to issue regulations under their establishing
statutes, as well as through statutes amending and extending the duties and
responsibilities of those agencies. Many regulations are issued under the notice-and-
comment requirements established by the Administrative Procedure Act (APA).8
Passage of the APA in 1946 provided the framework within which agencies would
perform administrative actions, including rulemaking.9 The APA does not just apply
to new rules, but applies to any changes or attempts to repeal or revise existing
regulations. In a few instances, federal agencies are required to include elements of
adjudicatory proceedings such 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. On occasion, agencies are
required to conduct rulemaking exercises under formal adjudicatory proceedings.10
Many of the general rulemaking requirements of the APA have been further defined
by federal court rulings that have sought to make the rulemaking process more
accessible to the public and more fair and meaningful to affected parties.
The notice-and-comment procedure of Section 553 of the APA (often called
“informal rulemaking”) requires an agency to publish a notice of proposed
rulemaking in the Federal Register. Publication in the Federal Register affords all
8 Lubbers, A Guide to Federal Agency Rulemaking, pp. 1-92.
9 60 Stat. 237; June 11, 1946; 5 U.S.C. 551-559,701-706,1305, 3105, 3344, 5372, 7521.
10 CRS Report RL30795, General Management Laws: A Selective Compendium—107th
Congress, by Ron C. Moe.
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interested persons an opportunity to participate in the proceedings either by written
comment or, at the agency’s discretion, oral presentation. When consideration of the
relevant matter is completed by the regulatory agency, these comments are
incorporated into the final rule record. Also, final rules published in the Federal
Register contain a detailed, comprehensive statement of the specific regulations’
basis and purpose. A final rule normally must be published in the Federal Register
at least 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). Under President
Clinton’s Executive Order 12866, a period for comment was established as not less
than 60 days.11 The APA itself does not specify the length of the public comment
period. Executive Order 12866 also adds several other requirements to rulemaking
not stipulated in the APA. The current Bush Administration has followed this
executive order, and will for at least the immediate future.
Under Executive Order 12866, agencies can issue regulations only upon
reasoned determinations of benefits and costs. All regulations must be submitted to
the Office of Management and Budget’s Office of Information and Regulatory
Affairs (OIRA), and any major regulation (impact exceeding $100 million a year)
submitted for review and clearance must be accompanied by a cost-benefit analysis.
Agency regulatory plans must include risk assessment and analysis; agencies must
submit to OMB plans to review existing regulations; and the Vice President and
Regulatory Working Group will act as a forum to assist agencies in identifying and
analyzing regulatory issues. During the promulgation process, regulatory agencies
may extend or reopen the period for public comment at any time. Agencies are also
free to grant additional procedural rights to interested persons.
The current administrator of the Office of Information and Regulatory Affairs,
John D. Graham, has stated publicly that he is implementing a review policy that
places greater emphasis on science-based procedures, including cost-benefit analyses,
in evaluating proposed agency regulations.12 OIRA will review all significant
regulations for strict compliance with all procedures and guidelines to include risk
assessment, peer review, and evaluation of rules for their impact on state, local, and
Indian governments. Strict review will also be applied to regulations affecting energy
supplies and small businesses. This action is a shift away from a prior emphasis on
agency expertise in rulemaking decisions, and may portend a more active role for and
dominance over regulations by OIRA.
Stricter review procedures at OIRA may affect agency rulemaking, making
agencies more attentive to procedures and guidelines. Currently, agency rulemaking
procedures may differ slightly, depending on the significance of a particular
regulatory decision. Procedures may vary according to whether a rule is considered
major or minor; whether it is a new rule, a revision, or a repeal of an existing
regulation; or for many other reasons. Regardless, agencies are required to follow the
11 Executive Order 12866, “Regulatory Planning and Review,” 58 Federal Register 51735,
Sept. 30, 1993.
12 U.S. Office of Management and Budget, Office of Information and Regulatory Affairs,
Presidential Review of Agency Rulemaking by OIRA, Memorandum for the President’s
Management Council (Washington: Sept. 20, 2001).
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requirements stipulated in the APA. Failure to do so could result in a challenge by
OIRA or a reversal of the agencies’ rulemaking by the court.
Regulatory Reform Concepts
Background
Regulatory reform has been a significant issue for both Presidents and Congress,
due to the growing reach, scope, and numbers of regulations and regulatory programs
issued over the last 3 decades.13 Statutes have been enacted as reform measures, and
several of them are discussed later in this report.
Most regulations have both economic and social effects. The purpose of
economic regulation is to ensure the continuation of a competitive marketplace and
to correct market failures when competition does not exist or does not allocate
resources efficiently. Federal agencies such as the Federal Trade Commission or the
Securities and Exchange Commission are examples of federal agencies that conduct
economic regulation.
Regulations dealing with health, safety, and the environment, the so-called
“social regulations,” have been especially controversial. These social regulations,
while providing substantial protections, have also imposed significant economic
costs on business. Proponents of comprehensive regulatory 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, and that these 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 they question a perceived 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.
Supporters of health, safety, and environmental regulation believe that some of
the reform efforts focus too much on costs and not enough on benefits. They argue
that efforts to make the process more stringent hinder the ability of regulatory
agencies to safeguard the public’s health and safety and to protect the environment.
Suggesting that a more complicated regulatory process might produce unintended
negative consequences, they argue for retaining the current, relatively effective
regulatory process to avoid these unforeseen consequences. They assert that the
methodology and administrative process that agencies currently apply to rulemaking
are adequate in evaluating the need for rulemaking and its costs and benefits. They
argue that additional reforms might ultimately prevent or unnecessarily delay needed
regulations as well as impose additional costs on agencies and risks to the public.
13 Marc Allen Eisner, Regulatory Politics in Transition (Baltimore: The Johns Hopkins
University Press, 2000).
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Several factors make it difficult to resolve differences regarding the need for
regulatory reform. First, contending parties often disagree on the need for a
particular regulation; some prefer a market solution. Second, the available
information necessary for effective use of risk assessment, cost-benefit, or cost-
effectiveness analysis (tools required for sound rulemaking) often is ambiguous and
incomplete. Finally, these tools depend largely on assumptions and other subjective
factors, thereby making them subject to bias and manipulation.
In recent years, efforts to reform the regulatory process have, for the most part,
focused on the following 10 areas: (1) use of cost-benefit analysis and cost-
effectiveness analysis when developing regulations, especially regulations likely to
impose annual costs of $100 million or more; (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 these 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”
or devalued 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 cost of these mandates.
Each of these areas is briefly discussed below.
Cost-Benefit and Cost-Effectiveness Analyses
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 these costs and benefits are distributed across different groups in
society. A full analysis recognizes that 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 aspects 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 identifying and 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 cases in which large incremental costs result in
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minor gains. A disadvantage, however, is that misjudgments in determining the goal
or the budget may go undetected.14
Risk Assessment
Risk assessment 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
developing and 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 reduction.
Controversy focuses on how risk analysis should be used and how much influence
it should have on health, safety, and environmental decisions. Critics argue that risk
analysis is often not scientific and not entirely objective, in part, because of
inadequate data regarding most chemicals, health effects, and ecological effects. The
concern is that risk analysis may oversimplify problems and its conclusions can be
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
analyses for environmental and health regulations may use quantitative estimates of
risk to assess benefits (i.e., risks avoided), but quantitative analyses, critics claim,
may undervalue such benefits, especially when projected over time. Critics further
contend that comparative risk analysis is unscientific, and that priorities should not
be based on risk alone.15
Regulatory Budget
There has been some discussion of a regulatory budget. Such a budget would
be designed to improve regulatory accountability and control. Its purpose would be
to force agencies to determine their regulatory priorities in two ways. First, the
budget could impose an analytical framework to attempt an overview of the total
costs and benefits of regulations. Second, the budget might limit the total volume of
regulatory programs, expenditures, and compliance costs, by setting a cap on the
compliance costs each agency could impose on regulated sectors of the economy,
both private and public. While evoking some congressional interest, there are
differing approaches to its appropriate range, contents, and objectives. Implementing
a regulatory budget would present many conceptual and empirical problems. These
include the scope of regulations 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 impact
on firms, industries, and consumers, beyond compliance costs); benefit estimates
14 CRS Report RL30031, Environmental Risk and Cost-Benefit Analysis: A Review of
Proposed Legislative Mandates, 1993-1998, by Linda-Jo Schierow.
15 CRS Issue Brief IB94036, The Role of Risk Analysis and Risk Management in
Environmental Protection, by Linda-Jo Schierow.
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(generally regarded as more difficult to determine than estimating costs); and
redundancy or overlap with state and local regulations.16
Congressional Review
Proponents of congressional review of regulations believe it better insures that
Congress has an opportunity to reject unnecessary, overly intrusive, or excessively
costly regulations. Congressional review, as enacted, requires agencies to send each
of their final regulations to Congress and the General Accounting Office (GAO) for
review before it takes effect. Implementation of the regulation may occur during the
congressional review. Congress then has 60 legislative days to address the
regulation. A regulation, whether or not it has become effective, can 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 and Congress overrides the veto.
Congress can reject the regulation at any time during the 60-day period. If a
Congress adjourns before the 60 days has ended, the 60 days to review is renewed for
the next, incoming Congress. Congress has overturned one regulation since the
passage of this Act in 1996.
Critics argue that congressional review encroaches on agency independence, can
politicize rulemaking, delays the timely issuance of regulations, and requires an
expertise in subject areas that Congress does not have readily available to it (one of
the reasons Congress delegates regulatory authority to agencies in the first place).
Proponents respond, however, that congressional review enables Congress (with
whom the power to regulate constitutionally rests) to make the final decision on the
need for specific regulations, and makes regulatory agencies more sensitive to
congressional intent and Congress more accountable for regulators’ actions.17 (See
“Congressional Review Act,” below.)
Judicial Review
Judicial review subjects agency actions to court scrutiny 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 “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, and scope of review. Arguments over judicial review result from two
primary concerns: first, the lack of such review may make agencies less accountable;
and second, expanding judicial review may encourage frivolous court challenges and
perhaps undermine the rulemaking process because of inadvertent errors, an inability
to obtain hard data, or subjective evaluations of data by judges. Judicial review also
helps insure that agencies follow proper regulatory procedures.
16 Samuel Hughes, “Regulatory Budgeting,” Center for the Study of American Business,
Washington University, Working Paper 160, June 1996.
17 CRS Report RL30116, Congressional Review of Agency Rulemaking: A Brief Overview
and Assessment After Five Years, by Morton Rosenberg, and CRS Report RL30795,
General Management Laws: A Selective Compendium—107th Congress, by Ron C. Moe.
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Moratoriums on Regulations
Since 1981, there have been three moratoriums on regulations. Two of the
moratoriums were issued by incoming Presidents Ronald Reagan and George W.
Bush (1981 and 2001), both of whom wanted to review and possibly block
regulations issued at the end of outgoing administrations. George H. W. Bush also
issued a moratorium, but later in his presidency. 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 and delay the
implementation of important regulations. Supporters, on the other hand, argue just
the opposite, and assert that moratoriums help to block undesirable regulations and
enable the new administration and federal agencies to revise or eliminate less
desirable regulations. President George W. Bush’s moratorium took effect on
January 20, 2001, and ran for 60 days. Now expired, this moratorium was announced
by issuance of a memorandum from the White House Office by Andrew H. Card, Jr.,
Assistant to the President and Chief of Staff.18
Under President George W. Bush’s regulatory review plan (moratorium), federal
regulatory agencies were ordered to stop sending proposed or final rules to the Office
of the Federal Register for printing unless the rules had been reviewed and approved
by a Bush appointee. Regulations already sent to the Office of the Federal Register,
but as yet not printed, were returned to the issuing agencies. A regulation already
printed and final had its effective date postponed for 60 days. These temporary
actions postponed many regulations issued at the end of the Clinton Administration.
Although the moratorium has expired, the future status of some regulations proposed
or withdrawn is unclear. Many have been allowed to go forward; some have been
dropped; and still others are under revision.
Paperwork Reduction
The growth in regulations has imposed significant paperwork burdens on
individuals, businesses, and organizations—both large and small—and state and local
governments. All generally agree on the need to reduce the amount of paperwork
required to comply with regulations. Paperwork can consume numerous man-hours
and imposes costs on those affected. Proponents of paperwork reduction argue that
forms and reports required to be completed should be streamlined, simplified, and
consolidated to avoid unnecessary and burdensome duplication. Other observers,
however, argue that without adequate information from regulated entities or program
beneficiaries, agencies may not be able to carry out their congressional mandates to
monitor compliance effectively. The Office of Information and Regulatory Affairs
18 U.S. White House Office, “Regulatory Review Plan,” Federal Register, vol. 66, no. 16,
Jan. 24, 2001, p. 7702.
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in OMB is the focus of the paperwork reduction effort because it controls the
information collection activities of executive agencies.19
Private Property “Takings”
Much of the property rights debate is primarily centered on two statutes: the
Endangered Species Act and the wetlands protection program under the Clean Water
Act. Property rights activists have advocated two approaches. One calls for federal
agencies to establish a procedure for assessing values if their proposed actions are
likely to result in the “taking” of property under the Fifth Amendment of the
Constitution. President Reagan adopted this approach in 1988 when he issued
Executive Order 12630.20 The other approach calls for a statutory dollar threshold
to stipulate when a federal agency must compensate a property owner as a result of
agency action resulting in 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 major diminution in property value before
compensation is owed.21
Sunset of Regulations
Sunset is a mechanism designed to mandate a systematic reexamination of
existing regulations to determine if they are still useful. One variant of sunset
provides for agency review to determine if a regulation should be terminated.
Another requires automatic termination unless the agency successfully argues
otherwise. Sunset proponents believe that without an automatic review mechanism,
regulations will continue long after they are viable. Critics agree that selected
regulations should be reviewed periodically, but contend that automatic termination
of thousands of regulations creates an enormous workload burden on understaffed
and underfunded federal agencies, possibly interfering with an agency’s ability to
address new issues and regulatory requirements mandated by Congress.22
Unfunded Mandates
“Unfunded mandates” is a term used to describe responsibilities or duties
imposed by the federal government on state and local governments without
providing funding appropriate to the level of 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 state and local
19 CRS Report RL30590, Paperwork Reduction Act Reauthorization and Government
Information Management Issues, by Harold Relyea, and CRS Report RL30795, General
Management Laws: A Selective Compendium—107th Congress, by Ron C. Moe.
20 Executive Order 12630, “Governmental Actions and Interference with Constitutionally
Protected Property Rights,” 43 Federal Register 8859, Mar. 18, 1988.
21 CRS Report RS20493, Property Rights: House Judiciary Committee Reports H.R. 2372,
by Robert Meltz.
22 CRS Report RL30795, General Management Laws: A Selective Compendium—107th
Congress, by Ron C. Moe.
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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 concern
about the increasing cost of complying with federal mandates.23 (See “Unfunded
Mandates Reform Act,” below.)
Negotiated Rulemaking
Negotiated rulemaking is a concept that emerged in the 1980s as a method to
reduce the adversarial nature of rulemaking. In essence, agency rule makers
negotiate the text and contents of a proposed regulation with interested and affected
parties prior to drafting the regulation. If a consensus can be reached, it might make
implementation of the regulation easier and it could lesson the likelihood of
subsequent litigation. At worst, authorities state, the agency has a better
understanding of the concerns of affected parties. Critics point out, however, that
negotiated rulemaking works best on proposed regulations that are non-controversial
in the first place. When a consensus is unlikely, requiring agencies to devote limited
manpower and funds to this effort may distract from the agency’s ability to perform
its regulatory mission.24 (See “Negotiated Rulemaking Act” below.)
Federal Efforts to Reform the Regulatory Process

During the last 30 years, both Presidents and Congress have struggled to lessen
the number, intrusiveness, and cost of federal regulatory activity. Most of the effort
has resulted in changes in the rulemaking process and other procedural changes, to
better assure that agencies issue regulations only when necessary, and that regulations
produce a net benefit at the lowest cost to society. These procedural changes have
often been contentious and remain so today.
Presidential Efforts
Presidential efforts to reform regulatory procedures have generally been carried
out through executive orders. Independent regulatory agencies are exempt (defined
as such under (44 U.S.C. 3502 (10)). However, independent regulatory agencies can
voluntarily comply. Presidents Richard M. Nixon, Gerard R. Ford, and Jimmy Carter
all instructed federal agencies to include calculations of compliance costs and to
consider alternatives to regulation in their regulatory activities when legally
permitted.
23 CRS Report RS20058, Unfunded Mandates Reform Act Summarized, by Keith Bea and
Richard S. Beth.
24 CRS Report RL30795, General Management Laws: A Selective Compendium—107th
Congress, by Ron C. Moe.
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President Ronald Reagan, however, initiated a more dramatic change in
regulatory procedure with the issuance of Executive Order 12291.25 E.O. 12291
directed agencies to employ cost-benefit analyses when developing regulations and
established centralized review of agency rulemaking, two features that are now basic
elements in the regulatory process. President Reagan’s order also directed agencies,
again to the extent legally permitted, to issue only regulations whose calculated
benefits outweigh the costs. Agency compliance was insured by requirements for
submitting both proposed and final regulations to OMB’s Office of Information and
Regulatory Affairs (OIRA) for review and clearance. The order further required that
agencies continue to publish their semiannual agendas of proposed regulations (first
required by President Carter). Regulations responding to emergency situations and
regulations with statutory or judicial deadlines were exempted from review and
clearance procedures, but still had to be submitted to OMB.
In 1989, concern about the continued costs of regulations led President George
H. W. Bush to establish the President’s Council on Competitiveness to review
regulations issued by agencies.26 Chaired by Vice President Dan Quayle, the council
focused on reducing the financial burdens of new and existing regulations. In
January 1992, the President imposed a 90-day moratorium on regulations and
instructed agencies to identify existing regulations and programs imposing
unnecessary regulatory burdens and to develop programs to reduce or eliminate those
burdens. Regulations that were issued in response to emergency situations, had
statutory or judicial deadlines, dealt with military or foreign affairs, or were 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 Bill Clinton assumed office in 1993, he also initiated several
steps to reform the regulatory process. In September 1993, the President issued
Executive Order 12866,27 which revoked E.O. 12291 and E.O. 12498, but retained,
with some modifications, the major provisions of these two orders, in particular, cost-
benefit analysis and centralized review and clearance of regulations by OIRA.
Independent regulatory boards and commissions again were exempted from the order
(voluntary compliance with the order was possible). In addition to the executive
order, President Clinton established the National Performance Review (NPR) in
1993, a task force headed by the Vice President. The NPR generated reports
addressing and recommending improvements in the regulatory process.28 Also in
September 1993, the President ordered executive branch agencies to submit to OIRA
within 90 days a list of regulations for which they planned to use negotiated
25 Executive Order 12291, “Federal Regulation,” 43 Federal Register 13193, Feb. 17, 1981.
26 Executive Order 12498, “Regulatory Planning Process,” 50 Federal Register 1036, Jan.
4, 1985.
27 Executive Order 12866, “Regulatory Planning and Review,” 58 Federal Register 51735,
Sept. 30, 1993.
28 Office of the Vice President, From Red Tape to Results, Creating a Government That
Works Better and Costs Less, Improving Regulatory Systems, accompanying report of the
National Performance Review (Washington: GPO), Sept. 1993, p. 81.
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rulemaking.29 In April 1995, he directed agency heads to use their enforcement
discretion to waive all or a portion of a penalty for regulatory violation to reduce
compliance costs to small businesses.30
As mentioned earlier, upon taking 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 near the end of the Clinton Administration and not yet published be returned
to the issuing agencies for review and approval; and that the effective date of
regulations that had been published in final, but had 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 health or safety emergencies and regulations under legislative or judicial
mandates.31
Congressional Efforts
In the late 1970s and early 1980s, Congress relied, in part, on the legislative veto
to overturn final regulations. Statutes applicable to several agencies and some
programs were written to make final regulations subject to either a one-house or two-
house veto before they could take effect. During this period, numerous bills were
introduced to enact a generic legislative veto provision applicable to all regulations.
This process was made invalid after the Supreme Court ruled the legislative veto
unconstitutional, finding that it violated bicameralism and the “presentation” clause
of the Constitution.32
A more direct approach taken by Congress was to deregulate previously
regulated industries. Since the 1970s, Congress has passed several laws deregulating
certain sectors of the economy. Areas of commerce that have been deregulated
include banking and other financial services; telecommunications, to include cable
and telephones; and areas relating to transportation, such as trucking and airlines.
Deregulation also resulted in the elimination of the Civil Aeronautics Board and the
Interstate Commerce Commission, although some of their programs were transferred
to other agencies.
29 U.S. President (Clinton), “Negotiated Rulemaking,” Memorandum of Sept. 30, 1993,
Code of Federal Regulations, vol. 3 (1994), p. 776.
30 U.S. President (Clinton), “Regulatory Reform-Waiver of Penalties and Reduction of
Reports,” Memorandum of Apr. 21, 1995, Code of Federal Regulations, vol. 3 (1996), pp.
474-475.
31 U.S. Executive Office of the President, “Memorandum for the Heads and Acting Heads
of Executive Departments and Agencies,” Federal Register, vol. 66, no. 16 (Jan. 24, 2001),
p. 7702.
32 INS v. Chadha, 103 S. Ct. 2764, Consumer Union, Inc. v. FTC and Consumer Energy
Council of America v. FERC, 103 St. 3556, and CRS Report RL30808, Government at the
Dawn of the 21st Century: A Status Report, by Harold C. Relyea, p. 36.
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In 1995, the House of Representatives, with the passage of H.Res. 168 (104th
Congress), changed its rules to enable the House to repeal regulations. This
resolution allows bills that would overturn regulations and that have been reported
favorably from a committee to be placed on the “Corrections Calendar” on the
second and fourth Tuesday of each month. A three-fifths vote of the House is
required to pass corrections legislation.33 The Senate does not have such a procedure.
Congress has also considered numerous other proposals that would directly
affect the administrative processes of all government agencies, including regulatory
agencies. Several laws have been enacted that have had a significant impact on
government–wide regulatory policy. The most far-reaching of these laws are noted
below.
Regulatory Flexibility Act. The Regulatory Flexibility Act of 1980 (5
U.S.C. 601-612), since amended, directs agencies to prepare analyses indicating how
agency regulations affect smaller entities, including businesses, organizations, and
state and local governments. The Act encourages an agency to tailor regulations so
that they are less burdensome to smaller entities. Copies of the agency analyses are
to be sent for review and comment to the Office of Advocacy in the Small Business
Administration. The Act also requires agencies to publish semi-annual regulatory
agendas describing regulatory actions they are developing. Amendments that were
part of the Small Business Act in 1996, discussed below, have strengthened the
Regulatory Flexibility Act.34
Negotiated Rulemaking Act. The Negotiated Rulemaking Act of 1990 (5
U.S.C. 561-570a), as amended and permanently authorized in 1996 (110 Stat. 3870),
seeks to overcome the perceived adversarial relationship between agencies and
affected interest groups that sometimes accompanies agency rulemaking. The Act
encourages agencies to consider convening a negotiated rulemaking committee that
includes private parties with an interest in the rule before developing or issuing a
proposed regulation under the Administrative Procedure Act (APA). The agency
would then issue the agreed upon proposal as a proposed or final rule if an acceptable
consensus can be reached .35
Paperwork Reduction Act. The Paperwork Reduction Act of 1980 (44
U.S.C. 3501-3520), since amended, seeks 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)
within the Office of Management and Budget, making OIRA responsible for
reviewing and clearing agency information collection requirements. Through E.O.
12291, OIRA also became the central clearinghouse for agency rulemaking actions.
33 U.S. Congress, House Committee on Rules, Establishing a “Corrections Calendar” in the
House of Representatives, report to accompany H.Res. 168, 104th Cong., 1st sess., H.Rept.
104-144 (Washington: GPO, 1995), and see also CRS Report 97-301, The House’s
Corrections Calendar, by Walter J. Oleszek.
34 CRS Report RL30795, General Management Laws: A Selective Compendium—
107thCongress, by Ron. C. Moe.
35 Ibid., p. 76.
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Agencies are required to create an office responsible for ensuring compliance with
information policies and information resources management.36
Unfunded Mandates Reform Act. 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, although the law applies to nonregulatory agencies as well.
The Act requires agencies to prepare a cost-benefit analysis and other assessment
measures before issuing (1) any general notice of proposed rulemaking likely to have
a federal requirement resulting in state and local expenditures of $100 million or
more in any single year, and (2) any final rule for which a general notice of proposed
rulemaking was published. The Act does not apply to independent regulatory boards
and commissions. The required assessments must include the extent to which costs
to state, local, and tribal governments may be paid with federal funds. When
developing regulations under the Act, agencies must consider reasonable alternatives
and select the least costly, most cost-effective, or least burdensome of the
alternatives, or explain in their written assessment records why such alternatives were
not chosen. The assessments would be published in the Federal Register, along with
proposed rules. The Act also allows for judicial review, but only to redress agency
failures to prepare written statements and analyses accompanying regulations.37
Small Business Regulatory Enforcement Fairness Act. Title II of the
Contract with America Advancement Act of 1996 is the Small Business Regulatory
Enforcement Fairness Act,38 which incorporates several regulatory reform proposals
under various subtitles.
Regulatory Compliance Simplification. (Subtitle A)39 Requires agencies
issuing regulations and the Small Business Administration to give small businesses
active assistance in understanding and complying with these regulations.
Regulatory Enforcement Reforms. (Subtitle B)40 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.
Equal Access to Justice Act Amendments. (Subtitle C)41 Awards
attorney fees and court costs to private parties, including large entities, if a court finds
an agency’s adversary adjudication claims in a hearing substantially in excess of the
36 Ibid., p. 68.
37 CRS Report RS20058, Unfunded Mandates Reform Act Summarized, by Keith Bea and
Richard S. Beth.
38 P.L. 104-121; Mar. 29, 1996; 110 stat. 847, at 857-874.
39 110 Stat. 858; 5 U.S.C. 601, note.
40 110 Stat. 860; 5 U.S.C. 601, note and 15 U.S.C. 657.
41 110 Stat. 862; 5 U.S.C. 504 and 28 U.S.C. 2412 (d).
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decision of the adjudicative officer, as well as unreasonable when compared with
other such decisions.
Regulatory Flexibility Act Amendments. (Subtitle D)42 Amends the
Regulatory Flexibility Act of 1980 by removing the prohibition on judicial review of
an agency’s decision to provide or not provide a regulatory flexibility analysis.
Federal courts may now order corrective action regarding such an 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 an analysis is not required, to the Small Business
Administration (SBA) for comment. In addition, a review panel consisting of
officials from the issuing agency, the Office of Information and Regulatory Affairs
(OIRA), the SBA’s Chief Counsel for Advocacy (small businessman’s advocate),
and another representative of SBA are to consider the impact on small business of
regulations issued by the Environmental Protection Agency (EPA) and the
Occupational Safety and Health Administration (OSHA).
Congressional Review Act. (Subtitle E)43 Requires agencies to submit new
regulations to Congress and the General Accounting Office (GAO) before the
regulations can take effect. GAO is required to prepare a report on each major rule
(over $100 million impact), which it sends on 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 Congress
overturns the veto.
Omnibus Consolidated Appropriations Act. The Omnibus Consolidated
Appropriations Act of 1997 (110 Stat. 3009) Title II, Section 645, requires the Office
of Management and Budget to submit to Congress a report estimating the costs and
benefits of all federal regulations and regulatory programs. The OMB report to
Congress must analyze the direct and indirect impact of regulations on the private
sector and state, local, and federal governments, and must recommend regulations
that should be revised or eliminated. Riders to appropriations acts have been used
by Congress, over the last several years, to require OMB to submit annual reports on
the costs and benefits of federal regulations, and to instruct OMB to issue guidelines
to agencies that would have the effect of standardizing the procedures to measure the
costs and benefits of regulations and the forms for accounting statements.

Truth in Regulating Act. The Truth in Regulating Act of 2000 (114 Stat.
1248-1250) requires GAO to evaluate independently 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 interim rules), a
chairman or ranking member of a congressional committee of jurisdiction of either
House may request GAO to review and report on the rule within 180 days. An
42 110 Stat. 862; 5 U.S.C. 603, 605, 609 and 611.
43 Title II, Subtitle E of P.L. 104-121; Mar. 29, 1996; 110 Stat. 868; 5 U.S.C. 801-808.
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economically significant rule is defined as any rule having an annual effect on the
economy of $100 million or more per year, or adversely affecting in a material way
the economy, a sector of the economy, or other specified sectors. GAO’s review
program has not taken effect, because funding has not yet been appropriated.
The GAO report is to include an independent evaluation of the agency’s analysis
of potential benefits and costs, or other analysis required, and any alternative
approaches considered in the rulemaking, as well as a summary of the results and
their implications. GAO is to evaluate the agency’s data, methodology, and
assumptions used in developing the rule; to explain how any strengths or weaknesses
in the data, methodology, or assumptions support or detract from conclusions reached
by the agency; and to discuss the implications of any weaknesses. The program is
authorized for three years, beginning in 2001and ending in 2003, and the Comptroller
General is to recommend to Congress whether it should be made permanent. As
mentioned above, the GAO review program authorized by this legislation has not
taken effect, because funding has not been appropriated by Congress.
Conclusion
Regulatory activity, responding to changing conditions in American society,
remains vigorous. Congress and the President continue their efforts to mitigate the
perceived intrusiveness and cost of this activity, while providing protections to the
public. In the absence of a consensus on a comprehensive regulatory reform bill,
smaller scale efforts are likely to continue. Contending factions remain split,
however, over the degree of risk a society should reasonably tolerate regarding
health, safety, and environmental matters, as well as how best to determine and
evaluate such risk.
For Additional Reading
CRS Issue Brief
CRS Issue Brief IB94036, The Role of Risk Analysis and Risk Management in
Environmental Protection, by Linda-Jo Schierow.
CRS Reports
CRS Report RL30116. Congressional Review of Agency Rulemaking: A Brief
Overview and Assessment After Five Years, by Morton Rosenberg.
CRS Report RL30031. Environmental Risk and Cost-Benefit Analysis: A Review of
Proposed Legislative Mandates, 1993-1998, by Linda-Jo Schierow.
CRS Report RL30183. Federal Regulations and the Federal Register: Statistical
Measurements, 1976-1999, by Rogelio Garcia.
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CRS Report RL30795. General Management Laws: A Selective Compendium—107th
Congress, by Ron C. Moe.
CRS Report RL30590. Paperwork Reduction Act Reauthorization and Government
Information Management Issues, by Harold Relyea.
CRS Report RS20058. Unfunded Mandates Reform Act Summarized, by Keith Bea
and Richard S. Beth.
Other Readings
Lubbers, Jeffrey S., ed. Developments in Administrative Law and Regulatory
Practice. Chicago: American Bar Association, 2001.
–—. A Guide to Federal Agency Rulemaking. Chicago: American Bar Association,
1998.
Selected World Wide Web Sites
Information regarding current and past regulatory policies and administrative
procedures is available at the following Web sites.
AEI-Brookings Joint Center for Regulatory Studies
[http://www.aei.brookings.org]
Center for Regulatory Effectiveness
[http://www.thecre.com]
Competitive Enterprise Institute
[http://www.cei.org]
General Accounting Office (GAO)
[http://www.gao.gov]
Government Printing Office (GPO)
[http://www.access.gpo.gov/nara]
Heritage Foundation
[http://www.regulation.org]