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Executive Summary #1274es

April 20, 1999

April 20, 1999 | Executive Summary on

Executive Summary: Regulatory Right to Know: Tracking the Costs and Benefits of Federal Regulation

Since fiscal year (FY) 1997, Congress has required the White House's Office of Management and Budget (OMB) to report each year on the costs and benefits of federal regulation as a condition of its annual appropriations. Because of the contributions these reports have made to understanding the effects of federal regulation, bipartisan support in Congress now exists for making this report process permanent and for strengthening it. Toward that end, on January 19, 1999, Senators Fred Thompson (R-TN) and John Breaux (D-LA) introduced the Regulatory Right to Know Act of 1999, S. 59. And, on March 11, 1999, Representatives Tom Bliley (R-VA), David McIntosh (R-IN), Gary Condit (D-CA), Charles Stenholm (D-TX), and 13 other Republicans and 14 other Democrats introduced a companion bill, H.R. 1074.

These legislative proposals reflect Congress's commitment to supporting the "public's right to know about the costs and benefits of federal regulatory programs." Unfortunately, federal regulators have been doing a woefully inadequate job of providing the public with useful information about the scope, scale, and impact of federal regulatory activity. Indeed, the size and frenetic pace at which the federal government produces new regulations strongly suggests the need for accountability and common sense. In FY 1998, some 53 federal departments and agencies--and 126,146 federal employees--spent approximately $17 billion in writing and enforcing federal regulations.

As Table 1 summarizes, the U.S. General Accounting Office reports that, between April 1, 1996, and March 31, 1999, federal regulatory agencies issued more than 12,925 final rules and sent them to Congress for review. Of these, 188 were major final rules that each carried an estimated annual cost to the economy of more than $100 million, for a total of at least $18.8 billion in new regulatory taxes in the past three years. And this does not even account for the costs of the remaining 12,737 final rules.

The Regulatory Right to Know Act of 1999 builds on Section 625 of the Treasury and General Government Appropriations Act of 1998 (P.L. 105-61), which directs the OMB to prepare a
regulatory accounting report. Similar reporting requirements also were in the 1996 and 1997 OMB appropriations laws, and these reports have been delivered to Congress. The most recent--the OMB's second annual report--was published on February 5, 1999.

The Regulatory Right to Know Act also builds on important lessons learned from the OMB's two annual reports to Congress. The act would require the OMB to report not only aggregate estimates of costs and benefits, but also the costs and benefits of individual rules because, as the OMB itself notes, the "substance is in the details, not in the total"; it is more useful to assess whether individual regulatory actions in and of themselves generate more benefits than costs. In addition, because agencies lack consistency in their benefit-cost methods of analysis and tend to overestimate benefits and underestimate costs, the OMB would be required to develop methods to standardize measures of costs and benefits, and the OMB's regulatory accounting statement would be subject to both peer review and public comment to make it more difficult for either the agencies or the OMB to engage in vast overstatements of benefits or underestimates of costs. Finally, the act would require the OMB to provide recommendations for the reform of regulatory programs.

The two OMB reports already sent to Congress demonstrate that such accounting not only is possible, but also has the potential to become an extremely useful accountability tool to help Members of Congress to ensure that regulatory investments maximize benefits while minimizing costs and achieve the greatest levels of protection for the money spent. The need for this approach is highlighted in a 1996 study by the Harvard Center for Risk Analysis, which concluded that, if regulatory agencies targeted their efforts more efficiently and reallocated their resources to solve the most serious problems first, as many as 60,000 more lives a year could be saved.

Americans have as much right to engage in dialogue over regulatory priorities and spending as they have to debate federal budget priorities and spending. The country's governors, mayors, and city and county officials as well as farmers and small businesses all strongly believe they have a right to more and better information to help them to participate more effectively in the process of making regulatory policy. Yet, today, unchecked, unaccountable federal regulators have little incentive to provide information that helps to facilitate such a debate. The Regulatory Right to Know Act of 1999 would begin to bring the hidden costs, benefits, and other less-than-obvious effects of federal regulation into the sunlight so that Congress and the public could assess their effectiveness more accurately and inspire regulators to make more sensible policy choices.

Angela Antonelli is the former Director of The Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

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