Obama’s Order on Equity and Regulatory Analysis

In his speech before the U.S. Chamber of Commerce yesterday, President Obama reminded his audience that he has ordered federal agencies to fix or repeal any “regulations that are needlessly stifling job creation and economic growth.”  But Obama’s order – officially known as Executive Order 13,563 – did more than order a government-wide review of existing regulations.  It also contained language reiterating that federal agencies can consider the values of “equity” and “distributive impacts” when developing new regulations.

Why might these words be important?  Regulation typically generates winners as well as losers.  For decades, agencies have analyzed both the benefits and the costs of new regulatory proposals.  But they have provided much less explicit attention to the equity involved in who bears these benefits and costs, that is, to whether the impacts of new regulations are fairly distributed across society.  They also have done little to identify the precise circumstances when equity might justify even very costly regulations in order to help individuals otherwise disadvantaged in society.

President Obama’s recent order restates principles already found in Executive Order 12,866, which President Clinton originally adopted in 1993, and which both Presidents Bush and Obama retained.  Like the recent Obama order, Executive Order 12,866 specifically allows for agencies to consider both distributive impacts and equity when developing new rules.  Unfortunately, “Executive Order 12,866 provides no guidance about the meaning of ‘distributive impacts’ and ‘equity,’ nor about how these considerations should be incorporated into cost-benefit analysis,” according to Professor Matthew Adler of the University of Pennsylvania Law School and the Penn Program on Regulation.

Does President Obama’s new Executive Order 13,563 provide any clearer guidance?  That is the question Representative John Sullivan (R-OK) presumably had in mind when, at a recent hearing of the House Energy and Commerce Committee, he asked Cass Sunstein, Administrator of the Office of Information and Regulatory Affairs (OIRA), what “this gobbledygook” about “equity, human dignity, fairness and distributive impacts” means.  Administrator Sunstein’s prepared testimony to the Committee did not mention the words equity and distributive impacts, saying only that Executive Order 13,563 “reaffirms the principles, structures, and definitions established by Executive Order 12866.”   A memorandum Sunstein issued to federal agencies last week unfortunately offered no more specific guidance, and he added nothing more in a White House blog post yesterday about “smarter regulation.”

It would appear, then, that “no clear paradigm for equity analysis has yet emerged in governmental practice,” as Professor Adler noted several years ago.  Perhaps the lack of rigorous guidance about equity analysis stems merely from scholarly neglect or from governmental inattention, something that time and additional research will help resolve.  Or perhaps the lack of guidance stems from some deeper epistemological intractability.

In Executive Order 13,563, President Obama has declared that “equity, human diginity, fairness, and distributive impacts” are “values that are difficult or impossible to quantify” – the emphasis added here, notably, to a word that appears nowhere in the earlier Executive Order 12,866.  In light of how closely Obama’s Executive Order otherwise tracks the Clinton order’s statement of regulatory principles, it is hard not to notice the addition of the word “impossible.”  Those agencies seeking further White House guidance about how to apply equity analysis to their regulatory decision making could very well be waiting a long time.