In 1981, President Reagan issued Executive Order 12291, which required agencies to estimate the benefits and costs of their economically significant regulations.
Ever since then, debates over benefit-cost analysis (BCA) have had a predictable tenor to them. Opponents of regulation have supported BCA and the most strident supporters of regulation have opposed it.
Through it all, however, presidents of both parties have found that BCA is an important tool that allows them to better exercise oversight over regulatory agencies.
On Jan. 30, President Trump issued his first executive order on regulation. Most of the attention on the order has been focused on its requirement that agencies rescind two regulations for every one that they issue. This requirement may actually have a limited impact because agencies run by Scott Pruitt and Andrew Pudzer — Trump’s nominees for Environmental Protection Agency administrator and Department of Labor secretary, respectively — are unlikely to issue a lot of discretionary regulations anyway.
And there are numerous exceptions in the order that should allow agencies to issue the regulations they have to.
In addition, the executive order might be rescinded by the next president, meaning that it won’t affect the ability of future presidents to issue regulations. So all that it accomplishes in the arena of regulatory policy is making it difficult for agency heads who don’t like regulation to issue regulations.
That’s like telling your kids that for every homework assignment they do, they have to skip two.
Don’t expect much complaining from the kids.
{mosads}The longer term effect of the order may be more insidious, particularly for those of us who believe in good economic analysis and good government. As Joe Aldy points out, the executive order directs agencies to only consider the costs of regulation, not the benefits. But regulations both impose burdens on businesses and reduce risks for individuals — that’s why Republican and Democratic presidents have supported the use of benefit-cost analysis.
Understanding these tradeoffs leads to better decisions.
The Trump administration does not appear to be interested in tradeoffs. By focusing only on the costs of regulations, they will ensure that their regulatory decisions are, in an economic sense, worse than those of their predecessors. Businesses may save some money (with an emphasis on “may,” since as noted above, the order may not have much of a practical effect), but if these savings occur, they are likely to pale next to the costs of the illnesses and premature deaths that will be ignored.
The Trump executive order could be used to strengthen and broaden the use of retrospective review of regulations. Retrospective review was championed by the Obama administration. Looking back at whether regulations work and how much they cost is an important step in ensuring that we are avoiding needless burdens on business. But in order to do so effectively, agencies must pay attention to whether regulations are working to help people, not just how much they have cost.
Finally, the order ends what has largely been bipartisan support for the idea of doing sound economic analysis. Those of us that support good benefit-cost analysis will have a harder argument to make now that a Republican administration has effectively abandoned the concept.
A President Elizabeth Warren, for example, may insist that we look only at the benefits of regulations, not the costs. Such an approach would be as wrongheaded as the one that Trump has implemented. But President Trump’s executive order has made such an approach easier to defend.
Stuart Shapiro is an associate professor and director of the Public Policy Program at Rutgers University and a member of the Scholars Strategy Network.
The views of contributors are their own and not the views of The Hill.