The White House, the Office of Information and Regulatory Affairs (OIRA), and Regulation

Cass R. Sunstein

Big Questions

• How much (if any!) White House control of regulation and rulemaking?

• Independent agencies? (SEC, FCC, Federal Reserve?

• How much transparency?• And note: What to do in Jan. 2009? (Economic

crisis – moratorium? Jobs?) Jan. 2017?

Clarifying Notes

• Legislation, then regulations• Two big ones: Affordable Care Act, Clean Air Act• Food safety, homeland security, immigration, air

travel, rail travel, agriculture, prisons, civil rights, much more (today’s paper; reginfo.gov)

• NOT independent agencies (but Treasury IS included)

• Definition of independent agencies (FCC, the Federal Reserve, FTC, NLRB)

Goal: Evidence, Not Intuitions

Toward Regulatory Moneyball

“The guy’s an athlete, Bill,” the old scout says. “There’s a lot of upside there.” “He can’t hit,” says Billy. “He’s not that bad a hitter,” says the old scout. . . . Paul reads the player’s college batting statistics. They contain a conspicuous lack of extra base hits and walks.“My only question,” says Billy, “if he’s that good a hitter why doesn’t he hit better?” . . . Over and over the old scouts will say, “The guy has a great body,” or “This guy may be the best body in the draft.” And every time they do, Billy will say, “We’re not selling jeans here,” and deposit yet another highly touted player, beloved by the scouts, onto his [bad] list.

A Slogan

• “That’s sewer talk.”• “Get your mind out of the gutter.”• BUT

Origins

• Reagan Administration and EO 12291: 1980• Note on executive orders! (vs. law, vs. PM; the

Reagan tale)• All “executive” agencies; not independents• Why?• James Miller: “If you’re the toughest kid on

the block, most kids won’t pick a fight with you.”

Executive Order 12291

• PROCESS: “Agencies shall prepare Regulatory Impact Analyses of major rules and transmit them, along with all notices of proposed rulemaking and all final rules, to the Director”

• SUBSTANCE: “Regulatory action shall not be undertaken unless the potential benefits to society for the regulation outweigh the potential costs to society”

EO 12291, continued

• SUBSTANCE: “Regulatory objectives shall be chosen to maximize the net benefits to society”

• SUBSTANCE: “Among alternative approaches to any given regulatory objective, the alternative involving the least net cost to society shall be chosen”

Four Motivations

• Fragmentation of executive branch (DOT & EPA, fuel economy; DOT & DOJ, disability)

• **Need for technical control (through economics) (rear visibility in cars)

• Excessive regulation (air pollution?) Job-killing regulations?

• **Presidential management and priority-setting (9/11; Affordable Care Act; climate)

• NOTE: Technocratic and political strands

The Reagan Years

• Process: OIRA review (precise meaning to follow)• Substance: Cost-benefit and net benefits• 3 Objections:• Politicizes the process (white house involvement)• Weakens the role of expert agencies (and prevents

important safeguards, eg food safety and environment)

• Is unlawful (because of veto authority)

Clinton and EO 12886

• Many people hoped the process would be truncated or killed

• It did not happen. (Why? A speculation: No President wants to lose managerial authority over the bureaucracy, including his own Cabinet. “They work for me.” How can that be operationalized? Cf. legal issues.)

• Process and substance ratified

EO 12866: Process

• FIRST: For each matter identified as, or determined by the Administrator of OIRA to be, a significant regulatory action, the issuing agency shall provide to OIRA:

• (i) The text of the draft regulatory action, together with a reasonably detailed description of the need for the regulatory action and an explanation of how the regulatory action will meet that need;

EO 12866: Process

• and (ii) An assessment of the potential costs and benefits of the regulatory action, including an explanation of the manner in which the regulatory action is consistent with a statutory mandate and, to the extent permitted by law, promotes the President’s priorities and avoids undue interference with State, local, and tribal governments in the exercise of their governmental functions.

EO 12866: Process

• SECOND: Except to the extent required by law, an agency shall not publish in the Federal Register or otherwise issue to the public any regulatory action that is subject to review under section 6 of this Executive order until (1) the Administrator of OIRA notifies the agency that OIRA has waived its review of the action or has completed its review without any requests for further consideration . . .

Conflict Resolution: EO 12866

• To the extent permitted by law, disagreements or conflicts between or among agency heads or between OMB and any agency that cannot be resolved by the Administrator of OIRA shall be resolved by the President, or by the Vice President acting at the request of the President, with the relevant agency head (and, as appropriate, other interested government officials).

• A reality check (how often?? How public??)

EO 12866: Substance

• THIRD: Each agency shall assess both the costs and the benefits of the intended regulation and, recognizing that some costs and benefits are difficult to quantify, propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.

• Each agency shall tailor its regulations to impose the least burden on society

EO 12866: Innovations

• BUT:• Distributive impacts (HIV entry; health care) • Recognition of the nonquantifiable (rear

visibility)• Time constraints (90 days);• Disclosure requirements (OIRA-agency

interactions);• Vice presidential mediation

George W. Bush

• Continued Clinton EO (interesting, yes? Surprising? Note the complex EO revision process)

• Added significant guidance documents and policy statements (IMPORTANT)

• Attracted much criticism• Greenhouse gas issue• Prompt letters and return letters

Obama, 2009

• New Executive Order?• Operated for 2 years without one• No moratorium on regulation• No significant slowdown• Two perspectives: fewer rules than Bush vs.

far too many (more that count as “economically significant”) – “job-killing regulations”?

Executive Order 13563: “Mini-Constitution” (and OIRA’s guidebook)

• Process and substance retained, and also:• 1) Cost-benefit analysis; maximize net benefits• 2) Low-cost tools: “each agency shall identify and

consider regulatory approaches that reduce burdens and maintain flexibility and freedom of choice for the public. These approaches include warnings, appropriate default rules, and disclosure requirements as well as provision of information to the public in a form that is clear and intelligible.”

EO 13563, continued

• 3) Public participation: “Before issuing a notice of proposed rulemaking, each agency, where feasible and appropriate, shall seek the views of those who are likely to be affected, including those who are likely to benefit from and those who are potentially subject to such rulemaking.”

• 4) Scientific Integrity

Executive Order 13563, continued

• 5) Integration and coordination: “Some sectors and industries face a significant number of regulatory requirements, some of which may be redundant, inconsistent, or overlapping. Greater coordination across agencies could reduce these requirements, thus reducing costs and simplifying and harmonizing rules. In developing regulatory actions and identifying appropriate approaches, each agency shall attempt to promote such coordination, simplification, and harmonization.“

• 6) The Regulatory Lookback

OIRA Realities

• A genuinely interagency process, with many participants

• Presidential priorities matter a lot (healthcare rules, greenhouse gas rules)

• Delay occurs because significant interagency concerns have not been met (coal ash, prison rape, energy efficiency)

• Some come in and never go out (stuck or withdrawn)

• Pre-submission consultation, sometimes

OIRA Realities

• Costs and benefits are very important (if benefits lower than costs, a red flag)

• Legalities greatly matter (Department of Justice and WH Counsel often involved; conflicts, sometimes, with lawyers at agencies)

• Public participation and alternatives greatly matter

Inside the Black Box

• Pre-submission (just agencies, or with EOP – sometimes it is said, NO)

• “Uploaded into ROCIS” (circulation) (no “process fouls” – tale of USDA/DOL)

• NEC, DPC, CEQ, OSTP*, CEA*, USTR, OVP, COS** (!)

• Public meetings available to all (capture??)• Comments and meetings

Inside the Black Box

• Agency reactions to comments: a) good! b) ok; doesn’t matter c) all wrong

• “Elevation”: assistant secretaries, deputies, cabinet heads

• POTUS (rare and not always visible)

A Surprise

• Public comments are VERY important• Tribute to Hayek (dispersed nature of

knowledge in society)• And to Sen (“government by

discussion”)

Characteristic OIRA concerns

• Paperwork burdens?• Alternatives discussed? (Eg, rear visibility; fuel

economy labels; menu labels)• Public comments a) sought and b) discussed?• Costs and benefits – how cut the former and

increase the latter?• Note on meetings (capture?) and making

issues salient

How to Engage with OIRA

• Comments (substantive)• Meetings• Open doors ONCE RULE IS UNDER REVIEW• Substance, not politics• The tale of gainful employment (good, bad,

ugly)• The tale of ozone (COS)

OIRA Myths

• OIRA is highly political (generally untrue; technocratic office) (but other WH offices can introduce political considerations)

• OIRA second-guesses scientific evidence (not true; convenes interagency process); “science policy,” eg carcinogens

• OIRA itself is source of delay (PROCESS is source of delay – often LONG)

Delay! – Red Means More Than 90 Days

OIRA Realities

• Process is highly technical rather than political• OIRA aggregates dispersed information• The (sad?) tale of asthma inhalers (Montreal

Protocol BUT) • The tale of mercury• The tale of ozone

Asthma Inhalers

• “Dear Sir: I am outraged and sorely disappointed in the insensitive manner that this matter of extreme importance to multi-thousands of patients relying upon this drug (pibuterol acetate & others) for their very lives. I am 76 years of age and have been using this MaxAir Autohaler for a number of years. ”

Asthma Inhalers

• “I tried other inhalants but none were so effective for me and I am sure, thousands of other people. I have a 50% (FIFTY PERCENT) lung capacity and you can imagine the shock when I arrive at my Pharmacy for a refill only to be suddenly and without any prior notice, informed that the Max Air autohaler was no longer available. This product gives me 12 (TWELVE) hours relief which is extremely important to me so that I can get a good night's rest being able to breathe normally. The Xenopex HFC I am now on only gives me about 5-6 (FIVE TO SIX) hours relief, nor does it open my lungs up as well as the Max Air did.”

Max Air vs. Primatene Mist

• Under review (Max Air) vs.• Past review (Primatene Mist)• What was the Bush Administration thinking?• What was the Obama Administration

thinking?• Subsequent debates in Congress (could not

“fix”)

Mercury

• Very expensive (a concern); legally required• Benefits much higher than costs• PM cobenefits as driver! (justified?)• Costs cut significantly (in OIRA process)• A tale out of school (with member of Congress)• Supreme Court case• Compare ozone (much higher costs and much

lower benefits)

Ozone

• “The President has instructed me to return this rule to you for reconsideration. He has made it clear that he does not support finalizing the rule at this time.”

• Reasons: NOT cost as such; “stacking” • “More generally, the President has directed me to

continue to work closely with all executive agencies . . . to minimize regulatory costs and burdens, particularly in this economically challenging time. The President has instructed me to give careful scrutiny to all regulations that impose significant costs on the private sector or on state, local, or tribal governments.”

OIRA’s critics

• Too weak (first 2 years under Obama?)• Independent agencies?• Too strong• Delay and blown deadlines (90 days?)• Lack of transparency• Displacement of agency authority• Interest-group capture• Progressive lack of enthusiasm

Unhappy Words – Prof. Heinzerling

“If OIRA followed the spirit of 12,866 and 13,563 insofar as they do not envision OIRA changing the laws under which agencies operate, the problem of OIRA interfering with the agencies’ best judgments about the appropriate interpretations of the statutes they administer would go away.”

More Unhappy Words – Prof. Heinzerling

“If OIRA kept to EO 12,866’s deadlines, at least indefinite delay would not be one of the intrusions it visits upon the agencies. If OIRA sent return letters to agencies when it rejected rules, explaining in writing why it rejected them, there would exist a focal point for substantive discussion and accountability would be enhanced.”

More Unhappy Words – Prof. Heinzerling

• “If OIRA followed EO 12,866’s requirements for transparency, a good number of the issues surrounding OIRA’s opacity would disappear.”

• “If OIRA followed the process EO 12,866 requires for elevation and dispute resolution at the highest levels, and if OIRA followed the disclosure requirements pertaining to such matters, some of the concerns about accountability would be mitigated.”

Regulations.gov

Reginfo.gov

Regulatory Lookback

Executive Order 13563, Sec. 6(b)

“Within 120 days of the date of this order, each agency shall develop and submit to the Office of Information and Regulatory Affairs a preliminary plan . . . under which the agency will periodically review its existing significant regulations to determine whether any such regulations should be modified, streamlined, expanded, or repealed . . . .”

The Future

• “Agencies shall regularly report on the status of their retrospective review efforts to OIRA. Agency reports should describe progress, anticipated accomplishments, and proposed timelines for relevant actions, with an emphasis on the priorities described in section 3 of this order.

• Agencies shall submit draft reports to OIRA on September 10, 2012, and on the second Monday of January and July for each year thereafter . . . . Agencies shall make final reports available to the public within a reasonable period (not to exceed three weeks from the date of submission of draft reports to OIRA).”

Questions and Problems

• It is 2016. What do you do? New executive order? Instruct cabinet?

• Apply to independent agencies?• Employment impact statements?• Support legislation from current Republicans? (Codify

EO 13563? Judicial review?)• Invigorate lookback?• Scale back OIRA? Let agencies do their work? Or

impose new barriers?• Repoliticize process? Depoliticize process?

Questions and Problems

• Proper/lawful to hold off on regulations at certain times? Before a congressional debate? Until unemployment is lower? Because some area is not a high priority (in the sense that POTUS doesn’t care about it)?

• Transparency? (content of meetings? Content of interactions with agencies)?

• Deadlines?