It’s never been so late, but the White House Office of Management and Budget (OMB) released the 2015 Draft Report to Congress on the Benefits and Costs of Federal Regulations this weekend. We should have long since had this report, and be receiving the Draft 2016 one soon instead.
If it draws attention to the report at all, the Obama administration will say its fiscal year 2014 (October 1, 2013– September 30, 2014) executive agency major rules delivered benefits of up to $22.8 billion annually, while costing $3.0 billion to $4.4 billion annually.
Surveying the past decade, OMB pegs the cumulative benefits of a selection of 120 major regulations issued between 2004 and 2014 at between $260.9 and $981.0 billion (chart pp. 10-11). Meanwhile, the estimated range for costs is pegged at $68.4 to $102.9 billion.
Today’s creed holds that this subset of major rules (often those anticipated to have a $100 million up-or-down economic impact) account for the bulk of regulatory costs. The OMB maintains that (p. 23):
[T]he benefits and costs of major rules, which have the largest economic effects, account for the majority of the total benefits and costs of all rules subject to OMB review.
Well, OK, but wait a second.
The OMB’s net-benefit breakdown includes only rules for which both benefits and costs have been expressed in quantitative and monetary terms by agencies. For the $3.0 to $4.4 billion cost component encompassing the most recent fiscal year, we are talking about only 13 rules that had both benefit and cost analysis.
But agencies issued, by my check over at the Federal Register, 3,581 rules during the 2014 fiscal year. Numerous categories and cost levels of rules fly below radar.
For example, several billion more in annual rule costs appear in OMB's reports for a few rules that lack benefit estimates. These are not tallied by OMB, though I have done so here for all the reports prior to this new one; they yield another $28.8 billion since 2002 in annual costs in 2013 dollars. In the new report, a lone Health and Human Services administrative rule without a benefit tally costs $3.7 billion annually, along with two other rules costing some undisclosed amount below $100 million apiece.
Most pertinent, rules from independent agencies are entirely absent in OMB's cost roundup—all the Dodd-Frank stuff, all the Federal Communications Commission’s net neutrality interventions, all antitrust interventions in business and more.
The independent agencies do a lot of regulating these days.
So while OMB notes that "Federal agencies published 36,457 final [executive branch and independent agency] rules in the Federal Register" (p. 8) over 10 years, OMB's costs encompass just 120 of them. Along with missing most rules, OMB misses costs of “regulatory dark matter” like agency bulletins, circulars, memoranda, guidance documents—the “pen and phone” sorts of things.
Also when reckoning with costs, one may not ignore (but OMB does) categories of intervention that disrupt competitive enterprise without issuing rules at all, like cronyism, anticipated interference with fossil energy, uncertainty affecting business expansion and startups, and delays in private infrastructure permitting.
Thirty-three other major rules in OMB's report implemented transfer programs; such “budget rules” are officially considered transfers rather than regulations (Table 1-7(a), pp. 29-32). The casual treatment of budget rules as non-regulatory has become inappropriate now that Washington implements a conscious philosophy of explicit expansion of middle-class dependency on the federal government. When government assumes responsibility over ordinary daily living and stupefies a people, subsequent generations no longer recognize intervention and the forfeiture of liberty as a cost, and forget that, once upon a time, college, retirement, medical care, and childcare were personal and family matters.
Therefore the “subject to OMB review” clause in the quote above is quite an important qualifier. Plenty gets left out of the OMB assessment.
In contrast to OMB’s few dozen billion in costs over ten years, other estimates consider the broader aggregates. A 2014 National Association of Manufacturers modeled 2012 total annual regulatory costs in the economy of $2.028 trillion in 2014 dollars. My own reckoning using largely government data is $1.88 trillion annually.
The federal government should better clarify what it thinks it is really saying about the regulatory enterprise with respect to net benefits. In a prior filing to OMB, I outlined some steps the executive branch can take to improve disclosure.
But the reality is that Congress will need to act to improve regulatory and democratic accountability of the modern bureaucracy.
