House Subcommittee Considers Codifying Agency CBA

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Witnesses agree about the importance of thorough cost-benefit analysis.

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As Republicans and Democrats focus on ways to improve federal regulatory decisions, a House subcommittee held a hearing last week on potential legislation that would require agencies to conduct a cost-benefit analysis (CBA) before promulgating regulations.

Currently, regulatory agencies are required to prepare a CBA by Executive Orders – not actual legislation. This has meant that only executive branch agencies have been subject to CBA requirement.  New legislation could create a government-wide CBA requirement, imposed on independent as well as executive branch agencies.

At last week’s hearing, witnesses agreed that thorough CBA can improve the regulatory process. Sally Katzen, the former Administrator of the Office of Information and Regulatory Affairs (OIRA) under President Clinton, noted that “[CBA] is a way to  think about the consequences of a proposed action and then try to translate quite diverse consequences into the same metric [in order to] evaluate whether the proposal is, on the whole, good for us or not.”

John Graham, Dean of Indiana University’s School of Public and Environmental Affairs and former OIRA Administrator under President Bush,  noted that requiring agencies to ensure that public benefits justify the cost of regulations has been an approach endorsed by every president, Republican and Democrat, since Jimmy Carter.

Jeffrey Holmstead, a partner at the Washington law firm of Bracewell and Giuliani and former head of the air office of the U.S. Environmental Protection Agency under President Bush, expressed skepticism about how well agencies have complied with existing CBA requirements. Calling for legislative consideration of reforms that would strengthen these requirements and prevent the “misuse” of CBA, Holmstead observed that “federal agencies sometimes do not use CBA to inform their regulatory decision, but rather to justify actions they may want to take for other reasons.”

Katzen suggested, however, that agencies could improve their use of CBA even without new legislation, simply if they received more funding to do better analyses. Before Congress adds new CBA requirements legislatively, she recommended considering providing agencies with additional resources.