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Executive Summary #1336es on Regulation

November 1, 1999

Executive Summary: The Levin-Thompson Proposal: How Regulatory Improvement Veers Off Track

By

On March 25, 1999, Senators Carl Levin (D-MI) and Fred Thompson (R-TN) introduced S. 746, the Regulatory Improvement Act of 1999. The impetus behind this initiative is a concern about the increasing number of expensive, one-size-fits-all rules with diminishing returns--regulators chasing smaller and smaller risks at greater and greater costs--and the lack of accountability of regulators to the public for decisions they make.

As currently drafted, the Regulatory Improvement Act would affirm broad agency discretion, fail to improve public health, safety, and environmental outcomes significantly, and would make it more difficult for Congress, the courts, and the public to hold agencies accountable for their decisions. Not surprisingly, the White House has stated its willingness to sign the bill while opposing other regulatory accountability bills in Congress. 

The Regulatory Improvement Act of 1999 would help regulators avoid accountability and issue the regulations they want because it:

  1. Applies to a small set of all rules.
    The bill's requirements apply only to major rules, less than 2 percent of all final rules. According to the U.S. General Accounting Office (GAO), between April 1, 1996, and September 30, 1999, the federal government issued 15,280 final rules. Of these, 222 were major final rules with an annual economic impact of more than $100 million. 

  2. Exempts too many rules.
    The bill exempts a broad range of rules that can include pesticide and food rules. As a result, as little as 1 percent of final rules may actually be subject to the bill's requirements. 

  3. Affirms broad agency rulemaking discretion.
    In May 1999, the D.C. circuit court concluded in American Trucking Association v. EPA that under the non-delegation doctrine, the Environmental Protection Agency cannot interpret a statute so loosely that it becomes an unconstitutional delegation of legislative power. S. 746 would affirm an agency's discretion to interpret a statute and justify its consideration of a limited set of regulatory options. 

  4. Lacks effective decision criteria.
    There is nothing to prevent an agency from issuing a final rule that is "not likely to provide benefits that justify the costs" or fails to select the option that would "substantially achieve the rulemaking objective in a more cost-effective manner, or with greater net benefits" than other alternatives considered. 

  5. Creates loopholes to avoid analysis requirements.
    The bill allows an agency to adopt a major rule without doing the required cost-benefit analysis if the agency finds "good cause" that "conducting the regulatory analysis...before the rule becomes effective is impracticable or contrary to an important public interest." A 1999 GAO report suggests that up to one-fifth of the final major rules--approximately 10 each year--may never be subject to the initial or final analytical requirements based on past agency actions. 

  6. Falls short on risk assessment transparency.
    Even though the risk analysis requirements are the strongest part of this bill, weaknesses include: agency discretion about when to inform the public of a risk assessment and to perform comparative risk analysis; the exclusion of risks associated with declines in income; and the failure to require agencies to fully disclose to the public all of the data they intend to rely on in making risk assessments. 

  7. Leaves "peer review" discretion with agencies.
    Only rules that cost more than $500 million annually would be covered. Agencies will determine what kind of peer review--formal or informal--is warranted. Peer review is not necessary if the agency and the Office of Management and Budget (OMB) already determined that the rule has been subjected to "adequate" peer review. 

  8. Allows each agency to adopt its own analytical guidelines.
    A 1998 GAO report concludes that agencies lack consistency and clarity in their regulatory economic analysis methods and reporting. Nevertheless, S. 746 would allow each agency to develop it own guidelines and assumptions for regulatory analyses, rather than follow one set of guidelines, which would make comparisons between agencies difficult. 

  9. Includes weak language on judicial review that represents the lowest level of preemptive effect. A rule could not be remanded or invalidated by the court because underlying analyses were weak or important scientific information was excluded. The court would need to determine that the entire rulemaking was arbitrary and capricious based on the statute and not anything that is required in the bill. 

  10. Establishes a transparency double standard.
    OMB must disclose to the public information regarding the status of rules under review, changes made to rules, and communications related to the substance of a rule or contact with anyone not employed within the executive branch of the federal government. But neither the agencies nor Congress are subject to similar requirements. 

  11. Fails to expand the public's right to know about regulations.
    The bill fails to acknowledge the Internet and ways to expand public access to information about rulemaking. It continues to rely on the poorly subscribed Federal Register and agency dockets based in Washington, which are accessed by those who can afford to pay lawyers to go through them. 

The Regulatory Improvement Act of 1999 is fundamentally flawed and will not lead to real regulatory improvement. The exemptions, loopholes, and lack of real judicial review will leave the vast majority of federal rules untouched by its analytical and reporting requirements. For the less than 1 percent of rules it will cover, S. 746 gives an agency greater opportunity to justify any regulation but fails to give the public greater access to information or the legal tools needed to hold an agency accountable.

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

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