Smart Regulation: A Worthy and Achievable Goal

The following post comes to us from Andrew Liveris, President, Chairman and CEO of The Dow Chemical Company, and Chair of the Business Roundtable Select Committee on Smart Regulation.

Business Roundtable CEOs, who lead major U.S. companies representing every sector of the economy, understand that well-conceived, science-based regulations are essential to protect human health and safety. Regulations can help ensure that businesses retain the capacity to innovate and simultaneously promote the health and welfare of our employees, customers and communities. But overlapping, conflicting and poorly executed regulations can—and do—impose substantial costs on the U.S. economy, sometimes with only theoretical benefits.

That is why we have embraced a concept we call smart regulation that seeks to realize the goals of regulation without harming economic growth and job creation. About 18 months ago, we released a plan, Achieving Smarter Regulation, which laid out a roadmap for reform, including changes to current law and actions the Administration could take on its own, to streamline the federal regulatory process, reduce the economic burden of regulation and protect the public interest.

Our ideas have been well received on Capitol Hill and in the White House. For example, the Obama Administration has undertaken a retrospective review of existing regulations with the goal of simplifying and streamlining, and issued an executive order calling on independent agencies to participate.

Several of the most fundamental reforms we champion require Congressional action—and we have seen progress on that front as well. Both the U.S. House of Representatives and the Senate have introduced similar versions of bipartisan legislation, the Regulatory Accountability Act of 2013, which would write smart regulation into law. The House bill, H.R.2122, is sponsored by Bob Goodlatte (R-VA) and Colin Peterson (D-MN). The Senate bill, S.1029, is sponsored by Rob Portman (R-OH) and Mark Pryor (D-AR). These are serious legislators engaged in a serious effort to achieve meaningful reform to improve the functioning of government.

What does the Regulatory Accountability Act do?

1) The Act facilitates earlier and more meaningful public engagement in federal rulemaking. The notice and comment process in federal rulemaking has been described as “one of the greatest inventions of modern government,” but it can still be improved. The first inkling most citizens may get of an agency’s thinking is when it publishes a Notice of Proposed Rulemaking in the Federal Register—but, at that point, the agency has already invested substantial resources and it can be difficult to change course. H.R. 2122 would require agencies to issue an Advance Notice of Proposed Rulemaking whenever they anticipate that a rule will impose costs of $100 million or more annually or have other major economic impacts. S. 1029 would require a “notice of initiation,” similar to what EPA and DOT already do, in such cases. Either approach would flag potential new rules that are economically significant and give interested parties greater opportunity to identify effective, low-cost solutions early on, potentially saving resources for both agencies and regulated entities.

2) The Act requires objective cost-benefit analysis for all major rules. Thoughtful identification of regulatory and non-regulatory alternatives, and careful review of their benefits and costs, is the best way to ensure that agencies only regulate when the benefits justify the costs, and that agencies adopt the least costly regulatory alternatives that meet the objectives of the underlying statute. Wherever possible, agencies should adopt performance-based rules, and use economic incentives and publication of information in lieu of command-and-control approaches. The Act would codify these practices and standards, which have been national policy since the Clinton Administration. The White House Office of Management and Budget (OMB) would be required to update its guidelines regarding the assessment of costs, risks and benefits—and agencies would be required to provide reasoned explanations of how they evaluated the guidelines and other considerations specified in the bill. The Act would apply these requirements equally to executive branch agencies and to independent regulatory boards and commissions. The Act would also backstop OMB’s customary oversight role by allowing courts to take account of agency compliance, and by strengthening judicial review.

3) The Act encourages the use of better quality information in rulemaking. It requires agencies to adopt rules based on the best scientific, technical and economic information. Both bills would provide for disputes over such information to be aired in a “mini-trial” process before a final rule costing $1 billion or more per year can be issued, which will help avoid mistakes for the rules most important to our economy, and should reduce the number of times such disputes give rise to successful judicial challenges after a rule is issued. The House bill additionally calls on OMB to issue guidelines applying the Information Quality Act (IQA) to rulemaking. This requirement would eliminate any doubt that IQA applies to rulemaking and ensure that rules are based on quality information. The House bill would also confirm that agency IQA decisions outside the rulemaking context are reviewable in court—an important clarification.

4) The Act implements widely-supported process reforms. Where agencies use the “good cause” exemption to skip the notice and comment stage because doing so would be impracticable or contrary to the public interest, the Act would require them to seek comment after the fact and then issue a new final rule. The Senate bill also adopts a solution to “midnight rulemaking” proposed by the Administrative Conference of the United States.

America’s business leaders strongly support the Regulatory Accountability Act because it will create a regulatory environment that promotes increased economic growth and opportunity—in balance with other societal goals.

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