The Biden memo on improving regulatory review reintroduces competent, bipartisan cost-benefit analysis.
President Joe Biden’s day-one presidential memorandum on “modernizing regulatory review” reasserts the importance of evidence, analysis, and expertise in regulatory decision-making.
After a four-year long experiment in abandoning these norms of good governance, the Biden memorandum should comfort anyone who cares about cultivating a regulatory system that can improve the well-being of people in the United States.
The Biden memorandum highlights the continual need to improve the process of regulatory review and the methodology of cost-benefit analysis. In particular, the memorandum calls for a more proactive role for the Office of Information and Regulatory Affairs (OIRA), increased transparency of interagency review, and greater attention to distribution and equity.
These areas are important for continued development, and the Biden Administration should be commended for highlighting them. What is most critical in this memorandum, however, is not in the changes that it might bring, but rather in the longstanding values that it preserves and reinforces.
Readers of The Regulatory Review are well aware of the substantial bipartisan history of regulatory review and cost-benefit analysis in the United States. These practices gained a foothold in the Nixon and Carter Administrations, but it was former President Ronald Reagan’s Executive Order 12,291 that placed these practices at the heart of the contemporary administrative state.
In its early years, cost-benefit analysis saw strong opposition from protection-oriented groups and many congressional Democrats, who saw cost-benefit analysis as an anti-regulatory presidential power grab under the guise of good government.
But over the intervening decades, regulatory review and cost-benefit analysis have shown that, when executed well, they can help rationalize and improve the regulatory system. These tools are also entirely consistent with strong protections for values such as public health and a clean environment.
As Richard Revesz and I document in our recent book, a breakdown of the bipartisan consensus over cost-benefit analysis became apparent during the Obama Administration. The Obama Administration’s success in using cost-benefit analysis to support a strong regulatory agenda led many in the Republican party to abandon their prior support for the technique. Instead, politicians and interest groups engaged in rhetorical posturing that attempted to shift attention away from costs and benefits. For example, President Trump echoed many in the Republican party when he referred to new protections as “job-killing regulations” and accused the Obama Administration of engaging in a regulatory “war on coal.”
President Trump also took many concrete steps to undermine regulatory rationality during his time in office. These steps include his executive order requiring agencies to eliminate two regulations for every one new regulation, which disregarded the benefits of the prior rules. That order also established a regulatory budget of zero costs, meaning that no new net costs could be imposed on industry, no matter how great the benefits.
For the next four years, the Trump Administration followed through on the former President’s commitment to ignoring the benefits of regulation. President Trump appointed senior officials who were hostile to their agency’s mission. Agencies engaged in a wide array of dishonest accounting to hide the benefits of regulatory protection, such as ignoring indirect benefits or attempting to censor science-based public health. Agencies adopted regulations based on shoddy decision-making and without following proper legal procedures.
This recent history serves as a backdrop for the Biden memorandum—a document that represents an almost radical return to normalcy after four years of recklessness. The memorandum embraces the values of expertise and analysis. Even the substance of the Biden memorandum’s calls for reform are grounded in a long, bipartisan tradition.
With respect to equity considerations during regulatory review, the Clinton, Bush, and Obama Administrations all took small steps toward encouraging distributional analysis. Increasing the transparency of regulatory review was among the many innovations in President Bill Clinton’s Executive Order 12,866. These pro-transparency practices were continued during subsequent administrations of both parties. In terms of a proactive role for OIRA, it was during the George W. Bush Administration when former Administrator John Graham instituted the practice of issuing prompt letters to urge agencies to action when there were likely net benefits to be had from more regulation.
Progress can, and should, be made by the Biden Administration on all of these fronts. But the emphasis in the Biden memorandum on these three areas for reform is a further sign of continuity between this Administration and the pre-Trump era.
It is understandable if many Americans would like to forget about the Trump Administration and focus on the future. United control of government represents a relatively rare policymaking opportunity for Democrats. For Republicans, it is no fun to dwell on its former disastrous leader.
But lawyers know that anticanons—decisions that are famous for being profoundly wrong—can be as illuminating as correctly decided cases.
In fact, as much as our constitutional law is made up of actual precedents, it is also made up of cases that have earned universal condemnation, such as Dred Scott v. Sandford, Plessy v. Ferguson, Lochner v. New York, and Korematsu v. United States. In the area of presidential administration, the Trump Administration may come to be seen as an anticanon of everything that can go wrong—a negative example that points the way toward a more productive path.
But anticanons do not end debate. We can agree that Lochner was wrongly decided without agreeing on the appropriate role of government in regulating the marketplace. There will still be plenty to disagree about concerning regulatory review and cost-benefit analysis, even if—as I hope happens—the Trump Administration is seen as an aberration that is roundly rejected across the political spectrum.
The Biden memorandum takes an important step in that direction by reaffirming longstanding, bipartisan practices, marking out areas for further articulation and development, and starkly turning away from the prior Administration’s dangerous ways.
This essay is part of a six-part series entitled Regulatory Review Reimagined.
