President Biden, in his first day in Office, reversed his predecessor’s regulatory policy. The action emerged in an Executive Order and a Memorandum on 20 January 2021. The Executive Order abolished certain regulatory requirements, especially the “one-in-two” requirement for the introduction of new regulations. The Memorandum instructed the Office of Management and Budget (OMB) to consult with agency heads and to provide any further suggestions for modernizing the regulatory process. This blog look at these in turn.

Revocation of Certain Executive Orders

Four years ago, President Trump had introduced an Executive Order whereby for every new regulation issued, at least two prior regulations were to be identified for elimination, and the cost of planned regulations was to be prudently managed and controlled through a budgeting process.

In March 2017, my blog for PAI examined critically the policy under the title ‘Limited merit in President Trump’s Plan to reduce Regulation. I concluded that:

“…if the policy is applied across the board, there are individual policy areas that could experience negative impacts. Each area of regulation must be judged on its merits. If a new regulation is justified, it should be introduced.  If an existing regulation is outdated or no longer relevant, it should be amended or revoked. In short, the overall concern should not be a count of the number of regulations in place, but the quality of the individual regulations”.

President Biden revoked a number of executive orders on 20 January 2021, and in particular the  “one-in-two” policy, which was listed as Executive Order 13771 of January 30, 2017 and entitled ‘Reducing Regulation and Controlling Regulatory Costs’. The reasons for the revocations by the Biden Administration are summarised in table 1.

Why President Biden revoked certain Executive OrderSource
“It is the policy of my Administration to use available tools to confront the urgent challenges facing the Nation, including the coronavirus disease 2019 (COVID-19) pandemic, economic recovery, racial justice, and climate change.  To tackle these challenges effectively, executive departments and agencies (agencies) must be equipped with the flexibility to use robust regulatory action to address national priorities.  This order revokes harmful policies and directives that threaten to frustrate the Federal Government’s ability to confront these problems, and empowers agencies to use appropriate regulatory tools to achieve these goals”.The White House Government briefing room – Presidential actions 21/01/2021 – Modernising Regulatory Review

 

The relevant US public agencies are now taking action to implement Biden’s Executive Order.  Specifically, the Director of the Office of Management and Budget and the heads of agencies have been directed to – “… promptly take steps to rescind any orders, rules, regulations, guidelines, or policies, or portions thereof, implementing or enforcing the Executive Orders… as appropriate and consistent with applicable law, including the Administrative Procedure Act, 5 U.S.C. 551 et seq”. 

Modernizing Regulatory Review

The Biden Administration also set about overhauling the regulatory regime in a Memorandum entitled ‘Modernizing Regulatory Review’.

The Memorandum instructed the Director of Office of Information and Regulatory Affairs to consult with agency heads and to provide suggestions for modernizing the regulatory process. Table 2 sets out the steps to be taken.

Steps to Modernise US Regulatory ReviewSource
President Biden has directed the Director of Office of Information and Regulatory Affairs (OIRA) “ –

“…to begin a process with the goal of producing a set of recommendations for improving and modernizing regulatory review.  These recommendations should provide concrete suggestions on how the regulatory review process can promote public health and safety, economic growth, social welfare, racial justice, environmental stewardship, human dignity, equity, and the interests of future generations.  The recommendations should also include proposals that would ensure that regulatory review serves as a tool to affirmatively promote regulations that advance these values.  These recommendations should be informed by public engagement with relevant stakeholders

 

The White House Government briefing room – Presidential actions 01/20/2021 – Modernising Regulatory Review

There has been mixed reactions to the proposed review. Professor Rena Steinzor welcomed the Memorandum, but argued that “… the Administration will improve regulatory review only if it elevates the substantive and political judgments of agency administrators over the repressive instincts of the small cadre of economists whose power has varied depending on OIRA’s leadership”.

Cass Sunstein, who served as Administrator of the Office of Information and Regulatory Affairs during the Obama Administration, was more positive. He concluded that the Biden memorandum was “exceedingly important” because “it affirms the long-standing process managed” by the Office of Information and Regulatory Affairs, including “a significant role for cost-benefit analysis.” Moreover, he pointed out that the – “… memorandum on regulatory reform embraces what is good in the status quo while also acknowledging that improvements can be made by responding to the strongest parts of the progressive critique”.

Tools used in Regulatory Process

During the past two decades, the US Regulatory Process has been using a 2003 Circular, which was issued by the Office of Management and Budget to guide Federal agencies on the development of regulatory analysis.

Two tools are included in the 2003 Circular and they are:

  1. Regulatory Analysis: “A good regulatory analysis is designed to inform the public and other parts of the Government… of the effects of alternative actions. Regulatory analysis sometimes will show that a proposed action is misguided, but it can also demonstrate that well-conceived actions are reasonable and justified.
  2. Cost Benefit Analysis: “Benefit-cost analysis is a primary tool used for regulatory analysis…Where all benefits and costs can be quantified and expressed in monetary units, benefit-cost analysis provides decision makers with a clear indication of the most efficient alternative, that is, the alternative that generates the largest net benefits to society (ignoring distributional effects)…”

The Office of Information and Regulatory Affairs, which is undertaking the current review, has been directed to identify ways to modernise and improve the regulatory review process, including through revisions to the OMB’s 2003 Circular. Obviously the review will be considering whether or not the current tools are ‘fit for purpose’. It will be interesting to see the extent that these tools are amended under the Regulatory Review.

Tom FerrisTom Ferris

Tom is a Consultant Economist specialising in Better Regulation. He lectures on a number of PAI courses and blogs regularly for PAI. He was formerly the Senior Economist at the Department of Transport.